The key attraction of the Indo-Lanka Free Trade Agreement (ILFTA) for Sri Lanka was enhancing export market diversification, thereby reducing reliance on traditional markets in Europe and the United States and tapping into the fast-growing Indian market.
During a conference last week to mark 10 years of the ILFTA, it became clear that in the first five years of implementation, while exports from Sri Lanka to India had grown over eight fold, this was dominated by a few items, primarily vanaspathi and copper.
As exports of these products came to a halt by 2009, Sri Lanka’s exports to India declined. In 2009, Sri Lanka’s exports to India were US$ 322 million compared to US$ 56 million in 2000.
A press release by the organizers of the conference, the Institute of Policy Studies (IPS), the Centre for WTO Studies, the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) and the Indo Lanka Chamber of Commerce and Industry (ILCCI) stated that several exporters have succeeded in making inroads into the Indian market in sectors such as furniture, garments, ships, animal feed, rubber gloves, rubber tyres, food products and electrical machinery among others.
Furthermore, products such as MAS’ Amante label have succeeded in capturing lucrative niches in high end consumer markets in India and Colombo Dockyards has succeeded in outbidding established Indian firms in major ship repair contracts. It was also pointed out that several small-scale exporters, such as strawberry producers have begun to take advantage of the FTA in more recent months.
At the same time, the press release stated that Indian imports have grown substantially in the first decade of implementation but the bulk of these imports do not receive preferential tariffs under the ILFTA since they are in Sri Lanka’s negative list. These include products such as crude oil products, vehicles and parts, sugar and metals.
Therefore, it was made clear at the conference that while Indian exports to Sri Lanka were growing regardless of the FTA, Sri Lankan exports to India which has been somewhat slow to take off, have made inroads into the Indian market via the FTA as envisaged at the outset of the Agreement.