With India and Sri Lanka aiming for an early conclusion of the proposed bilateral Economic and Technology Cooperation Agreement (ETCA), after a five-year hiatus in the negotiations, the Commerce Department has asked various industry sectors to give inputs on crucial areas such as product specific rules to determine eligibility of items for tariff concessions.

“While an initial round of inputs was submitted by the industry when the negotiations resumed late last year, now that the two sides have made progress and are negotiating on details including on rules of origin, it is important to take the industry’s views before finalising commitments. That is why more inputs have been sought,” the official said.

Following visit of Sri Lankan President Ranil Wickremesinghe to India in July last year and the decision of both the countries to resume talks on the ETCA (that were stalled in 2018 after two years of negotiations), India and Sri Lanka re-started the negotiations in Colombo on October 30, 2023.

Colombo also hopes that the pact with India would help in its efforts to deal with the economic crisis it has been grappling with since the Covid-19 pandemic devastated its economy. 

Bilateral FTA

The India-Sri Lanka ETCA seeks to build upon the bilateral FTA signed in 2000 which already helped Sri Lanka in increasing its exports to India in several key commodities. The proposed ETCA has various chapters including trade in goods, trade in services, technical barriers to trade, sanitary and phytosanitary measures, rules of origin, customs procedure & trade facilitation, trade remedies, economic and technological cooperation and dispute settlement. It also seeks to eliminate non-tariff barriers and enable greater trade facilitation.

India hopes the ETCA will help it gain greater market access in items such as automobiles, auto parts, pharmaceuticals, certain textile products, chemicals as well as various services. Moreover, research by some industry bodies suggest that Sri Lanka could become a significant part of the Indian supply chain enabling Indian manufacturers to set up factories in the country to manufacture and export  products to nations with which Sri Lanka has or is planning to have Free Trade Agreements.

“The Commerce Department has asked various industry sectors to examine the proposed rules of origin (that determine how much value addition is needed for a product to be eligible for preferential tariff benefits) to see if there is a need of product specific rules (flexibilities) to either grant them more access in the Sri Lankan market or protect the domestic industry. It is very important to be precise in the demands put forward,” the official said.

India and Sri Lanka are also weighing the demands made by both sides in terms of implementation issues flowing from the India-Sri Lanka FTA. These include removal of import quotas on certain commodities, SPS notifications on dairy, market access for vehicles and certain issues on movement of professionals.

In 2023-24, India’s exports to Sri Lanka were valued at $4.11 billion while its imports were at $1.42 billion, per government data.

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