Sri Lanka to operationalize Rupee investments in Sri Lanka to boost Indian investments
Mint: The government of Sri Lanka is working on operationalizing Rupee investments in Sri Lanka in a move to boost Indian investments in its southern neighbour, two people aware of the matter told Mint.
Rupee investments will ease the way for Indian firms to enter the Sri Lankan markets, the people mentioned above said, speaking under the condition of anonymity.
During FY 2023, the Reserve Bank of India (RBI) allowed invoicing and payments for international trade in the Indian Rupee.
This allowed exports and imports to be denominated and invoiced in Indian rupees, with the settlement of trade transactions taking place in the currency.
The RBI’s decision is aimed at promoting the growth of global trade, especially Indian exports, apart from systematically internationalizing the currency. India wants the Indian Rupee to be a hard currency in the future, the second person mentioned above said.
Last year, Sri Lanka notified the Indian Rupee as a designated currency, which enabled trade between the two countries to be settled in the currency and also allowed tourists visiting the island-nation to use the currency for transactions.
India now hopes to work with Sri Lankan to make it easier for Indian firms to invest in the island nation.
“At present, Indian investors invest in the country through international currencies like the dollar, which is more cumbersome and involves conversion costs,” said one of the persons cited above.
“Rupee investments will ease the way for Indian firms to enter the Sri Lankan markets. The ministry of external affairs (MEA), in particular, is learnt to be pushing for this change,” the person added.
Spokespersons of the MEA, finance ministry and the Reserve Bank of India (RBI) didn’t respond to emailed queries.
India has built a closer economic relationship with Sri Lanka in recent years.
India is a key partner of Sri Lanka, playing a pivotal role in its recovery from the economic crisis that started in 2019 and threatened to derail the economy of the South Asian nation.
OSL take:
Sri Lanka and India have strong historical and bilateral ties that keep strengthening through the years. The two countries enjoy an operational free trade agreement (FTA) that would be further strengthened by the proposed Economic and Technological Corporation Agreement (ETCA). The close proximity of Sri Lanka to India and Sri Lanka’s increasing trade ties with other countries have all resulted in a growth in business, trade and investment dealings between Sri Lanka and India. The move by the Sri Lankan government to permit Rupee investments in Sri Lanka would see a boost in business/investment opportunities for Indian businesses/investors in the island. With Sri Lanka and India focused on further strengthening connectivity between the two countries and exploring the setting up of an investment zone in Sri Lanka’s Eastern Province, Indian businesses/investors could confidently explore the expanding business/investment opportunities in Sri Lanka. The growth and profits recorded by Indian businesses operating in Sri Lanka is a further confidence booster for other Indian businesses to also explore opportunities in Sri Lanka.
| Article Code : | VBS/AT/20240306/Z_8 |