India and Sri Lanka have a long-standing relationship that dates back to ancient times. The two countries have been trading partners for centuries, and the trade relationship between the two nations has only grown stronger over the years. In recent times, the two countries signed a free trade agreement (FTA) to boost their trade relationship.
The India-Sri Lanka FTA was signed in 1998 and came into effect in 2000. The FTA aimed to increase bilateral trade between the two countries by reducing trade barriers and tariffs. The FTA covers a wide range of products, including textiles, electronics, and food items. The agreement also provides for the exchange of technical knowledge and cooperation in fields such as agriculture, fisheries, and health.
One of the major benefits of the FTA is the reduction in tariffs on goods traded between India and Sri Lanka. Under the agreement, Sri Lankan exports to India enjoy preferential treatment with lower tariffs, making them more competitive in the Indian market. Similarly, Indian exports to Sri Lanka also benefit from reduced tariffs, making them more affordable for Sri Lankan consumers.
The FTA has also led to increased investment in both countries. Indian companies have set up manufacturing facilities in Sri Lanka, taking advantage of lower labor costs and access to the Sri Lankan market. Similarly, Sri Lankan companies have also invested in India, taking advantage of India`s large consumer base.
However, the FTA has been criticized by some in Sri Lanka who feel that it has led to an influx of Indian goods into the Sri Lankan market, thereby hurting local businesses. The Sri Lankan government has taken steps to address these concerns by imposing safeguard measures on certain products to protect local industries.
Overall, the India-Sri Lanka FTA has been beneficial to both countries, leading to increased trade and investment. While there are some challenges that need to be addressed, the FTA remains an important step towards closer ties between India and Sri Lanka.