Indian investors eye Sri Lanka’s economic resurgence for greater cross border synergy
Daily FT: Amid Sri Lanka’s journey towards economic recovery, Indian investors and businesses are closely monitoring the emerging opportunities in the local market.
Indo-Sri Lanka Chamber of Commerce and Industry (ISCCI) Vice Chairman Dr. Naresh Bana shared his perspective recently, on current investment trends, bilateral trade, and collaborative ventures between the two neighbours.
Despite strong tourism ties, Indian investment in Sri Lanka’s tourism sector remains cautious. “Indian investors, like their counterparts elsewhere, rely on credible data, projections, and business prudence,” Dr. Bana explains. The country’s credit rating challenges, influenced by banking and financial institutions, often determine the final investment decisions.
However, trading relations between the two nations remain robust.
On recent economic reforms, Dr. Bana highlights Sri Lanka’s efforts to diversify investment instruments through municipal bonds, real estate investment trusts (REITs), and SME listings. “These initiatives, if executed effectively, could accelerate economic growth,” he states, adding that Indian businesses are observing these developments while awaiting more consistent, reliable data to guide their decisions.
The ISCCI plays a crucial role in building Indo-Lankan economic ties. “We assist companies in securing industry tie-ups, facilitate bilateral trade, and disseminate policy-related information,” Dr. Bana shares. The Chamber’s initiatives aim to create a supportive environment for Indian investors and help Sri Lankan businesses establish a foothold in India.
The Blue Economy presents significant collaborative potential for India and Sri Lanka. With expansive coastlines, the two nations can leverage marine resources for mutual benefit. Dr. Bana outlines key areas for cooperation, including Marine Domain Awareness (MDA) and maritime security, fisheries and aquaculture, offshore energy, including hydrocarbons and wind farms, maritime trade and connectivity, tourism and marina development and research and innovation. He emphasises, “Collaboration in these areas would unlock economic and ecological benefits for both nations.”
The Adani Group’s investment in Sri Lanka is a significant milestone in Indo-Lankan energy cooperation. “The $ 442 million wind power project is not just an investment but a torchbearer for Sri Lanka’s renewable energy aspirations,” Dr. Bana notes. He highlights the project’s potential to stimulate ancillary industries, reduce energy dependency, and position Sri Lanka as a net energy exporter.
India remains Sri Lanka’s largest trading partner, with bilateral trade reaching $ 5 billion in 2023. The relationship is anchored by India’s ‘Neighborhood First’ policy, which includes development aid, credit lines, and infrastructure investments.
Indian businesses have established a robust presence across Sri Lanka’s economy. The Tata Group, Bajaj, and Airtel have significant investments in telecommunications, automotive, and financial services. Indian Oil operates in the energy sector, while ITC Hotels has recently entered the tourism and leisure market. Additionally, the Adani Group has made strategic investments, including the development of the Colombo West International Terminal and the acquisition of Singha Cement. All these ventures underline the strengthening economic ties and mutual business interests between India and Sri Lanka.
Dr. Bana also highlighted the importance of the forthcoming Economic and Technology Cooperation Agreement (ETCA), which is expected to further enhance trade and economic ties.
OSL take:
Sri Lanka and its neighbour India enjoy strong bilateral and trade ties that have been further strengthened by an operational free trade agreement (FTA). However, the two countries share strong trade, tourism and investment ties that have benefited both Sri Lanka and India. Sri Lanka’s close proximity to India and the many trade agreements as well as trade concessions enjoyed by the country with many foreign countries have helped Indian businesses currently operating in Sri Lanka to record growth and profits. Given Sri Lanka’s strategic positioning in the Indian Ocean and the interest shown by many foreign businesses/investors in the country, Indian businesses/investors could confidently explore the expanding business/investment opportunities in Sri Lanka that could also grow along with Sri Lanka’s plan to become a regional hub. Other foreign businesses could also look at setting up bases in Sri Lanka to engage with India and other countries in the region using the preferential treatment afforded to the island nation by India and other countries.
Article Code : | VBS/AT/20241209/Z_4 |