Indo-Sri Lanka bilateral trade up 4 times in post-FTA period

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New Delhi, May 11 (UNI) The Free Trade Agreement (FTA) between India and Sri Lanka, which was implemented in March this year, has increased the bilateral trade between the two countries four times since 2000, a study said today.

The total bilateral trade has increased four times in the post-FTA period to 2.7 billion dollars in 2006-07 from a mere 685 million dollars in 2000-01, the study conducted by industry body Ficci revealed.

The FTA implementation period for India was from 2000-2003, whereas for Sri Lanka, the implementation period was eight years that is from 2000-2008.

India has taken a lead over Japan in the post-FTA period in terms of share in Sri Lanka's global imports.

In 1999, India's share was 9.5 per cent in Sri Lanka's imports and it was the second largest importer after Japan.

But in 2005, India achieved a share of over 17.3 per cent in Sri Lanka's imports and became the largest importer.

Prior to the FTA, the bilateral trade between India and Sri Lanka grew by just 10 per cent per annum in the seven years period that is from 1993-99, the study said.

However, the FTA really accelerated the trade flow between the two countries and it grew by over 27 per cent in the post-FTA period that is from 2000-2006.

Sri Lanka has also improved its presence in Indian market in the post-FTA period. In the pre-FTA period, it was ranked at 61 position in India's global imports, observed FICCI study.

Although, the share of Sri Lanka in India's global imports was not significant but its position improved from 61 to 34 by 2006-07.

In terms of composition of bilateral trade, some important changes occurred in the post-FTA period, the study revealed.

In 1999-2000, cotton, automotive, vegetables, pharmaceuticals and machinery and appliances were the top five items of Indian exports constituting around 50 per cent of our total exports to Sri Lanka.

However, in 2006-07 mineral fuel and iron&steel replaced vegetables and machinery, in the top 5 items of exports to Sri Lanka.

About 30 per cent of our exports to Sri Lanka constituted mineral fuels in post-FTA period. Exports of mineral fuels registered an unprecedented increase from almost nil in 1999-00 to 702 million dollars in 2006-07 to Sri Lanka.

Similarly, iron&steel increased by more than four times in the post-FTA period.

Imports also witnessed a change in composition in post-FTA period. Vegetable/animal fats&oils became the largest importing items of imports from Sri Lanka replacing tea and coffee in the post-FTA period, highlighted FICCI study.

The study added that not only trade but even investment flows also increased significantly as a result of FTA. FTA provided an opportunity for Indian investors to export from Sri Lanka to India at zero duty and also to import raw materials in Sri Lanka at zero duty.

From April 1996 to March 2002, India's total FDI in Sri Lanka was only 62 million dollars. It ratcheted up to 450 million dollars as a result of FTA by 2004, observed the FICCI study.

UNI SBA AK VC1632

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