With this, India has taken a lead over Japan in the post-FTA period in terms of share in Sri Lanka’s global imports. In 1999, India’s share was 9.5 per cent in Sri Lanka’s imports and it was the second largest importer after Japan. But in 2005, India achieved a share of over 17.3 per cent in Sri Lanka’s imports and became the largest importer.
The FTA implementation period for India was from 2000 to 2003, whereas for Sri Lanka, the implementation period was 8 years ~ from 2000 to 2008.
The Ficci study further pointed out that prior to the FTA bilateral trade between India and Sri Lanka grew by just 10 per cent per annum in the seven years period between 1993 and 1999. However, the FTA really accelerated the trade flow between the two countries and it grew by over 27 per cent in the post-FTA period of 2000 to 2006.
Sri Lanka has also improved its presence in Indian market in the post-FTA period, the study observed. In the pre-FTA period, Sri Lanka was ranked at 61st position in India’s global imports. Although, the share of Sri Lanka in India’s global imports was not significant but its position improved from 61 to 34 by 2006-07.
In terms of composition of bilateral trade, some important changes occurred in the post-FTA period. In 1999-2000, cotton, automotive, vegetables, pharmaceuticals and machinery and appliances were the top five items of Indian exports, constituting around 50 per cent of the total exports to Sri Lanka. However, in 2006-07 mineral fuel and iron and steel replaced vegetables and machinery, in the top five items of exports to Sri Lanka. Imports also witnessed a change in composition in post-FTA period. Vegetable/animal fats and oils became the largest importing items from Sri Lanka replacing tea and coffee in the post-FTA period.
The Ficci study further said that not only trade but even investment flows increased significantly as a result of the FTA. It provided an opportunity for Indian investors to export from Sri Lanka to India at zero duty and also to import raw materials in Sri Lanka at zero duty. From April 1996 to March 2002, India’s total FDI in Sri Lanka was only $62 million. It ratcheted up to $450 million as a result of FTA by 2004.
- Sri Lanka Guardian
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