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India-Sri Lanka FTA: Going strong in 8th year |
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The India- Sri Lanka Free Trade Agreement is going strong in the eighth year of its implementation. While there have been complaints from some segments of industry about cheap tea, spices and vanaspati, the overall feedback is positive.
According to a recently released study on the Indo-Sri Lanka FTA by FICCI, the total bilateral trade increased by four times in the post-FTA period to reach $2.7 billion in 2006-07 from a mere $685 million in 2000-01. The FTA implementation period for India was from 2000 to 2003, whereas for Sri Lanka, the implementation period was eight years. Sri Lanka has just finished implementing its part of the bargain.
While the rate of growth in Sri Lanka’s exports has been much sharper than India’s export growth rate, India is not grudging Sri Lankan higher growth. This is because the trade gap was hugely in India’s favour prior to the agreement and the agreement has only narrowed its slightly. In fact, both sides are so satisfied with the FTA, that talks are in an advanced stage for converting the FTA into a Comprehensive Economic Partnership Agreement (CEPA). The proposed CEPA would include agreements in investments and services.
As per the study, India’s exports to Sri Lanka increased more than three times from $640 million in 2000-01 to reach $2.2 billion in 2006-07. The average annual growth rate of Indian exports in this post – FTA period was 25%. Sri Lanka’s exports to India witnessed an average annual growth rate of 47% and increased by more than 10 times in the same period. From as low as $45 million in 2000-01, Sri Lanka’s exports to India went up to $470 million in 2006-07. The growth rate of India’s imports from Sri Lanka was almost double than the growth of its exports to Sri Lanka for the period 2000-01 to 2006-07. This is primarily because of the low base of Sri Lanka’s exports.
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