Sri Lanka likely to sign new trade deal with India by December says Indian Council for Research on International Economic Relations
Chief Executive of the Indian Council for Research on International Economic Relations Chief Executive Rajat Kathuria has reportedly said that India and Sri Lanka are likely to sign a new trade deal by December and both countries should be more open in order to improve competitiveness and attract foreign direct investments.
“There is optimism that Economic and Technology Cooperation Agreement may be signed by the end of this year. Given the difference in market size one country will inevitably run a current account deficit and in this case it will be Sri Lanka,” Kathuria has been quoted as saying at the Sri Lanka Economic Summit in Colombo recently.
Kathuria has noted that a trade deficit is not necessarily bad as long as opened access to growing markets.
“China, South Korea and Japan benefited by opening their markets because domestic markets alone will not generate enough growth. This is something we need to realise,” Kathuria has explained.
“India feels it got is fingers burned with free trade agreements with Japan and South Korea, so now it’s taking things slow with the RCEP trade deal (with ASEAN and other countries) because it fears China will swamp the market. India also has a trade deficit with China.
“The immediate reaction is we didn’t negotiate our trade agreements properly. While that may be so, and I don’t agree with that argument, there is another reason. Perhaps India is not competitive enough,” Kathuria has added.
However, he has further noted that Sri Lanka shared the same anxieties about free trade agreements, but accessing growth markets was critical for long term growth for both countries.
OSL take:
The possibility of India and Sri Lanka signing the proposed Economic and Technology Cooperation Agreement (ETCA) by this December gives hope to increasing foreign investments to Sri Lanka and greater trade cooperation between the two countries. Sri Lanka already has a free trade agreement, but the ETCA will further enhance the trade ties and expand business opportunities for local and foreign businesses. Foreign businesses could look at setting up base in Sri Lanka to venture into the Indian market.
| Article Code : | VBS/AT/20092018/Z_1 |