India is seeking customs duty concessions on various goods, including cars, commercial vehicles, and machinery, from Sri Lanka as part of ongoing negotiations for a comprehensive Free Trade Agreement (FTA), according to an official.
Additionally, India has requested more lenient visa norms to facilitate the entry of professionals from India into Sri Lanka, the official added.
The 14th round of discussions between senior officials from India and Sri Lanka recently concluded in Colombo. Key issues discussed included rules of origin, goods, services, and technical trade barriers.
Conversely, Sri Lanka has called for the removal of a quota on apparel exports to India. The country is also seeking duty concessions on tea and certain agricultural products.
With elections announced in Sri Lanka, the official noted that the next round of negotiations will take place after the elections.
India and Sri Lanka have already implemented a free trade agreement covering goods, and they are now working to expand the pact to include more goods and services.
The India-Sri Lanka Free Trade Agreement (ISFTA), which came into effect in March 2000, strengthened economic ties between the two countries by reducing tariffs on a wide range of goods. Since the original ISFTA focused solely on goods, both countries have been negotiating for several years to expand it into a Comprehensive Economic Partnership Agreement (CEPA), which would encompass services, investment, and other areas of economic cooperation.
Under the current FTA, India permits limited imports of garments from Sri Lanka with a 50% tariff concession on up to 8 million pieces annually, provided that 6 million of these pieces use Indian fabric. India also offers a 50% tariff concession on up to 15 million kilograms of Sri Lankan tea each year.
According to the Global Trade Research Initiative (GTRI), Sri Lanka may be seeking the removal of the garment quota, particularly as India allows duty-free imports of garments from Bangladesh under the South Asia Free Trade Agreement (SAFTA) for Least Developed Countries (LDCs).
“However, agreeing to this request may not be straightforward for India, as allowing duty-free imports has already led to a significant increase in garment imports from Bangladesh, rising from USD 144.25 million in FY 2014 to USD 739.06 million in FY 2024, a cumulative growth of 412.34%,” said GTRI Founder Ajay Srivastava.
Sri Lanka has placed items like automobiles and electrical goods on its negative list, restricting their import.
Since the implementation of the ISFTA, trade between the two countries has seen substantial growth. India’s exports to Sri Lanka increased from USD 499.3 million in FY 2000 to USD 4.17 billion in FY 2023-24, a cumulative growth of 735.2%. Meanwhile, imports grew from USD 44.3 million to USD 1.4 billion over the same period.
In the last fiscal year, India’s major exports to Sri Lanka included petroleum products (USD 704 million), cotton (USD 260 million), pharmaceuticals (USD 255 million), refined sugar (USD 206 million), fabric (USD 223 million), machinery (USD 171 million), pepper (USD 90.9 million), car and motorcycle parts (USD 79.3 million), onions (USD 63.4 million), and pulses (USD 32 million).
Notably, India’s exports to Sri Lanka fell from USD 5.1 billion in FY 2023 to USD 4.17 billion in FY 2024, primarily due to a significant reduction in petroleum product exports, which declined from USD 1.78 billion to USD 704 million, according to GTRI.
India’s key imports from Sri Lanka in FY 2024 included coffee (USD 103.7 million), garments (USD 55.65 million), animal feed (USD 72.2 million), areca nut (USD 65.5 million), light pepper (USD 44.4 million), rough diamonds (USD 26.9 million), and rubber (USD 26.7 million).
A. Sakthivel, in charge of the Apparel Export Promotion Council Southern Region, expressed concerns about extending further concessions for garments to Sri Lanka, stating that it could negatively impact the domestic industry.
“We too manufacture these garments, and I believe India should not grant additional concessions,” Sakthivel remarked.
Source: PTI
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