| The Free Trade Agreement between India and | | | | % increase in bilateral trade between 2001 and 2004. |
| Srilanka came into full existence from 1st March | | | | At 15% of the total, India is the biggest source of Sri |
| 2000.This FTA basically deals with the modalities of | | | | Lankan imports. It is also the 3rd largest destination |
| the Duty Free Import of the Goods manufactured in | | | | for Sri Lankan exports. With FDI approvals of US $ |
| Srilanka. Which exempt specified goods imported | | | | 450 million, India is the 4th largest investor in Sri |
| under Indo-Srilanka Free Trade Agreement from the | | | | Lanka. Indian Oil Corporation, Taj Hotels, Apollo |
| Import Duty up to 100%. There is a clear business | | | | Hospitals, L & T, Ambujas, Tatas and Ashok |
| opportunity for manufacturers from India to set up | | | | Leyland are among the prominent Indian companies |
| unit in Srilanka so that the goods produced in Srilanka | | | | operating in Sri Lanka. Connectivity between the two |
| can be brought to India duty free availing the | | | | countries is at an all time high with approximately 100 |
| exemption provided in the Free Trade Agreement. | | | | flights per week, including Indian private airlines, to |
| Since there is no Excise Duty in Srilanka or Import | | | | and from 10 destinations in India. |
| Duty the goods produced there would be cheaper. | | | | India is a keen partner in developmental activities in |
| Establishment of free trade arrangements between | | | | Sri Lanka. About one-sixth of the total development |
| India and Sri Lanka has accelerated the development | | | | credit granted by Government of India is made |
| of national economies, promoting mutually beneficial | | | | available to Sri Lanka. At present two lines of credit |
| bilateral trade and strengthening intra-regional | | | | are operational. These are a US $ 100 million line for |
| economic cooperation. Both sides have recognized | | | | capital goods, consumer durables, consultancy |
| that the expansion of their domestic markets | | | | services and food items and a US $ 31 million line of |
| through economic integration is a vital pre-requisite | | | | credit for supply of 300,000 tonnes of wheat. A US |
| for accelerating their processes of economic | | | | $ 150 million line of credit for purchase of petroleum |
| development and have further recognized that | | | | products is operational since March 2005. Another one |
| comprehensive reductions and elimination of obstacles | | | | of US $ 100 million, earlier slated for rural |
| to bilateral trade through a bilateral free trade | | | | infrastructure projects including a road between |
| agreement would also contribute to the expansion of | | | | Anuradhapura and Trincomalee to be named the |
| world trade. | | | | Rajiv Gandhi Amity Highway, is now being made |
| Under the agreement Zero duty on around 1000 | | | | available for post-tsunami rehabilitation of the coastal |
| items has been provided by India with. 50% margin | | | | railway line |
| of preference on all items, except for those in the | | | | While the Free Trade Agreement has worked well; |
| Negative List. Tariffs has been brought down to zero | | | | there is scope for significant improvement. Currently |
| over a period of three years. Concessions on textile | | | | the Agreement covers only goods; there are a large |
| items has been restricted to 25%. Four chapters | | | | number of items in the negative lists (429 items in |
| under the textiles sector have been retained in the | | | | case of India, 1180 items in case of Sri Lanka as well |
| Negative List. India has retained less than 400 items | | | | as quantitative caps on tea and textiles) and |
| in its Negative List. These mainly include garments, | | | | implementation of the Agreement has thrown up |
| petro-chemicals, alcoholic spirits and coconuts and | | | | another set of issues. The two sides are jointly |
| coconut oil. Sri Lanka has around 1200 items in its | | | | addressing these practical difficulties arising out of the |
| Negative List. Items in the Negative List do not enjoy | | | | implementation of the FTA. Work is simultaneously |
| tariff concessions. | | | | going on to move to the next step of economic |
| Domestic value-addition requirements have been kept | | | | integration by expediting the Comprehensive |
| at 35%. If the raw-material/inputs are sourced from | | | | Economic Partnership Agreement (CEPA) between |
| each other's country, this is reduced to 25% within | | | | the two countries. Rounds of talks in New Delhi on |
| the overall limit of 35%. The criterion of 'substantial | | | | February 2005 resulted in the setting up of a Trade |
| transformation' has been provided in the Rules. | | | | Negotiating Committee and its sub-groups which have |
| Since the coming of the FTA in March 2000, trade | | | | since met in New Delhi and Colombo to finalize the |
| has grown rapidly. Bilateral trade exceeded US $ 1.7 | | | | Agreement by end-2006. |
| billion in 2004 and rose to US $ 2.025 billion in 2005. | | | | With a small beginning the Free Trade Agreement |
| Exports from India to Sri Lanka in 2004 amounted to | | | | between the two countries is another feather in its |
| US$ 1350 million, while exports from Sri Lanka to | | | | excellent bilateral relationship It is a huge leap forward |
| India in the same year amounted to US$ 382 million. | | | | but a lot more needs to be done in future to make it |
| It rose to further US $ 1.437 billion and US $ 588 | | | | a real success story. |
| million respectively in 2005. The FTA prompted a 257 | | | | |