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Indo-Lanka Free Trade

 Economic relations between India and Sri Lanka, which date back to
pre-colonial times, began to pickup in the 1990s with the
liberalization of the Indian economy
 The year 1998 saw the biggest boost in economic relations when
the two countries signed a bilateral Indo-Lanka Free Trade
Agreement (ILFTA), which began implementation in March 2000
 Among other factors, contemporary political forces led to the signing
of the Agreement
 The two countries agreed for preferential treatment on 5112 tariff
lines & an 8-year time table was devised for phasing out tariffs
 Indian state taxes were also to be removed gradually
 Asymmetry between the two countries was accommodated by
special & differential treatment
The extent of commercial services exchange between the two countries
has increased in the post-FTA period as demonstrated by the following
 Many SL students & patients travel to India to purchase education &
health services each year
 Approximately 70% of Colombo port’s income is from transshipment
earnings from India.
 Approximately 40% of SL airlines’ revenue is from the Indian market
(SL Airlines)
 SL IT firms have provided technical solutions to Indian companies
(interblocks sold internet banking solution to Indian banks,
Microimage sold Tamil SMS adaptation to Bharti Airtel)
 SL tourist sector firms such as Aitken Spence & Jetwing have ventured
into the Indian market
 India has become the largest source of tourists to SL
 Tourist arrivals from India grew rapidly at 20.9% per annum during
2000-2007 & accounted for 19.4% of the market share in 2008
Role Played by the ILFTA in Crisis Situations
 After the global financial & food crises & in the context of the ongoing
economic slowdown, it is important to examine whether the ILFTA has
played any role in attenuating the crisis and recovery effects in the SL
 The main role played by the FTA in the face of the crisis has been in
providing cheap Indian imports to SL consumers, such as oil, vehicles,
watches & pharmaceutical products, when prices are on the rise in other
 The fact that the Indian economy has remained relatively unaffected by
the economic downturn has been an additional advantage
 Geographical proximity has enabled savings on transport-related costs
 It is thus important to look beyond the FTA in order to promote more
cooperation which will enable the two countries to follow more inclusive &
sustainable development policies & provide necessary safeguards against
future crises

 It is important to rectify the shortcomings of the FTA & build on its

 The key opportunity is to tap into the large and dynamic Indian
market, by moving beyond the ILFTA towards broader economic
 Deep economic integration with a fast-moving economy like India
could contribute to stimulating growth rates in SL
 Today, as an economic crisis grips Sri Lanka’s traditional export
markets and a food price crisis engulfs the global economy, SL should
view India as an opportunity and not a threat, and strive towards
more meaningful cooperation in facilitating inclusive and equitable
development policies
Thank YOU

Presented by:
Sai Avinash Valluri