Sri Lankan policy makers urged to take advantage of the size of Indian market
Former Governor of the Central Bank of Sri Lanka (CBSL), Indrajit Coomaraswamy has reportedly urged Sri Lankan policymakers to take advantage of the size of the Indian market.
Coomaraswamy has made this observation during a speech at a joint Takshashila Institution and Pathfinder Foundation webinar last week, the Daily News reported.
“Sri Lanka is like an unsinkable aircraft carrier parked 20 miles off the coast of India. Sri Lanka is important to India and India is a great opportunity for Sri Lanka,” he has said.
“You can see India’s neighbourhood policy gain traction on the ground. It is in India’s strategic interests to have stability on its southern border given the sensitivities in the Northern border and that a lot of the strategic assets are in the South,” he has added.
Sri Lanka has a trade deficit of US$ 3.1 billion in favour of India however only 5% of India’s exports to Sri Lanka only comes on a concessional basis due to the Free Trade Agreement. Sri Lankan exports to India under the FTA accounted for US$ 490 million while total exports to India accounted for US$ 763 million. Coomaraswamy has noted non-tariff barriers to Sri Lankan exporters.
For the Indo-Lanka Free Trade Agreement to be successful the former Governor has further noted that there should be reciprocity and at the same time understanding the need for differential treatment. The positive list, the negative list, and the transition periods for liberalisation in the agreement showed that India understood this principle.
Coomaraswamy has said if ‘make in India’ succeeds then it will be an opportunity for Sri Lankan firms to plug into these supply chains.
India and Maldives have increased relations following the recent election in the Maldives. Grid connectivity between the two countries is a possibility.
Coomaraswamy has urged Sri Lanka to take advantage of the capital from the Belt and Road initiative with a stronger commercial relationship with China.
He has said, “If you look at the 2015 to 2019 period, India was Sri Lanka’s largest trading partner, it was the 3rd most significant source of FDI, and it was the largest source of tourists. India has been a source of concessional assistance and grants. The EXIM Bank of India has provided US$ 1.8 billion mainly for railway development. The grants assistance has gone to the rehabilitation of conflict-affected areas.”
A US$ 15 million grant was recently given following the talks between India’s Prime Minister Narendra Modi and Sri Lanka’s Prime Minister Mahinda Rajapaksa.
OSL take:
Sri Lanka and India enjoy strong bilateral and trade ties. The two countries also enjoy a functioning free trade agreement (FTA). Also, India has offered several credit lines to Sri Lanka to promote development in the island nation. Therefore foreign businesses interested in doing business with India could set up base in Sri Lanka to engage with India using the preferential treatment offered to local businesses. Sri Lanka’s geographical positioning in the Indian Ocean, ease of doing business environment and the many trade agreements as well as trade concessions enjoyed by the country have made it a business hub in the South Asian region.
| Article Code : | VBS/AT/20102020/Z_2 |