Facilitating Trade Between Sri Lanka and India

Abstract

The importance of the Indian market for Sri Lankan exporters cannot be overlooked. It is a large market with 1.3 billion people and a rising middle-class - those who earn between I NR 20,000-IN R100,000 a month has gone up from 25 million in 1996 to over 160 million in 2013.1 Plus, India is expected to outperform China in 2015 and 2016, with growth boosted by policy reforms, rising investments and lower oil prices. Furthermore, a half of India's population is under the age of 25 years, and with 12 million entering the labour force each year,2 India is well positioned to reap the benefits of a demographic dividend. Since 2000, in the year which the Indo- Lanka Free Trade Agreement (I LFTA) came into operation, Sri Lanka's exports to India have grown by about ten-fold and India is now Sri Lanka's largest trading partner. Currently Sri Lankan exporters have duty free access to the Indian market except for 429 items and products which receive specific concessions under the ILFTA. But does Sri Lanka really have easy and free access to the Indian market? Exporters at various forums have highlighted the practical difficulties of trading with India. A recent study by the Institute of Policy Studies of Sri Lanka (IPS) highlights some of these issues and suggests measures that can be undertaken to facilitate bilateral trade.