Consulate General of India

Hambantota, Sri Lanka

INDIA-SRI LANKA ECONOMIC AND TRADE ENGAGEMENT

( As updated in June 2021)

OVERVIEW:

• India and Sri Lanka enjoy a vibrant and growing economic and commercial partnership, which has witnessed considerable expansion over the years. The entry into force of the India-Sri Lanka Free Trade Agreement (ISFTA) in 2000 contributed significantly towards the expansion of trade between the two countries. Economic ties between the two nations also include a flourishing development partnership that encompasses areas such as infrastructure, connectivity, transportation, housing, health, livelihood and rehabilitation, education, and industrial development

• India has traditionally been among Sri Lanka’s largest trade partners and Sri Lanka remains among the largest trade partners of India in the SAARC. In 2020, India was Sri Lanka’s 2nd largest trading partner with the bilateral merchandise trade amounting to about USD $ 3.6 billion. Sri Lankan exports to India have increased substantially since 2000 when ISLFTA came into force and more than 60% of Sri Lanka’s total exports to India over the past few years have used the ISFTA benefits. Interestingly, only about 5% of India’s total exports to Sri Lanka in the past few years have used the ISFTA provisions, thereby indicating their overall competitiveness in the Sri Lankan market.

• In addition to being Sri Lanka’s largest trade partner, India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka. A number of leading companies from India have invested and established their presence in Sri Lanka. According to BoI, FDI from India amounted to about US$ 1.7 billion during the period 2005 to 2019. The main investments from India are in the areas of petroleum retail, tourism & hotel, manufacturing, real estate, telecommunication, banking and financial services. Similarly, investments by Sri Lankan companies in India are also surging and taking advantage of India’s dynamic economy and wider market. Significant examples include Brandix (about USD 1 billion to set up a garment city in Visakhapatnam), MAS holdings, Damro, LTL Holdings, and other investments in the freight servicing and logistics sector.

• Apart from the growth in trade and investment, India has been the largest source market of tourists visiting Sri Lanka, prior to the pandemic. The total number of tourist arrivals from India to Sri Lanka during January-December 2019 was 355,002 i.e. approximately 18.2% of the total tourist arrivals into Sri Lanka. Similarly, Sri Lanka is among the top ten sources of tourists visiting India. In 2019, more than 107,360 tourist visas were issued by the High Commission of India in Colombo to facilitate travel between India and Sri Lanka, along with 14,597 Business Visas.

• To enhance connectivity between the two nations India and Sri Lanka entered into an Open Sky Agreement enabling Sri Lankan Airlines to operate unlimited number of flights to six Indian airports. Sri Lankan airlines is also the largest foreign carrier in India and was operating over 100 flights per week to 14 destinations in India, prior to the pandemic.