India pushes for Comprehensive Economic Partnership with Sri Lanka

PM Modi says India will take necessary measures to ensure Sri Lankan goods enter Indian markets smoothly

Prime Minister Narendra Modi on Friday assured Sri Lanka that India would address the concerns arising out of the two-way merchandise trade between the neighbours, even as he pitched for having a Comprehensive Economic Partnership Agreement (CEPA).

Highlighting the need to expand the ongoing free trade agreement (FTA) signed in December 1998, Modi said India would take all necessary measures to see ensure Sri Lankan goods enter Indian markets smoothly.

“India's trade environment is becoming more open. Sri Lanka should not fall behind others in this competitive world. That is why we should conclude an ambitious Comprehensive Economic Partnership Agreement,” Modi said while addressing the Sri Lankan Parliament on Friday.

Modi, who arrived in Colombo for a two-day visit, was on the last leg of his three-nation trip to the Indian Ocean nations. Before Sri Lanka, he had visited Seychelles and Mauritius. He is the first Indian PM to visit Sri Lanka since Rajiv Gandhi’s visit in 1987.

Despite the FTA being in force for 17 years, the trade balance continues to remain in favour of India. As a result, Sri Lanka had been reluctant on signing the CEPA although it was negotiated after 13 rounds of talks, concluded in 2008.  An FTA is restricted to goods, while a CEPA encompasses trade in goods, services and investment. The FTA with Sri Lanka has been operational since March 2000.

“We will work with you to address your concerns to boost trade and make it more balanced,” Modi said.

“India can also be a natural source of investments... and to build your infrastructure. We have made good progress today. Let us also work together to harness the vast potential of the Ocean Economy,” Modi added.

The matter was also raised during his meetings with Sri Lankan President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe. Sri Lankan authorities have often complained about its exports facing non-tariff barriers and stringent customs rules while entering India.

India and Sri Lanka had also set up a joint study group in April 2003 to identify the sectors where bilateral trade can be enhanced.

According to a study by the Confederation of Indian Industry, while exporting to India, some restrictions noted by Sri Lanka were in terms of access to ports, quotas, stringent rules of origin requirements, and non-tariff barriers. The Indian tariff and non tariff barriers are cited as a major problem faced by Sri Lankan exporters.

Sri Lanka is India’s major trading partner in South Asia. Bilateral trade in 2013-14 was $5.2 billion with Indian exports amounting to nearly $4 billion and Sri Lankan exports to $678 million.

India emerged Sri Lanka’s largest trading partner in 2012 accounting for 20 per cent of that country’s imports and 5.6 per cent of exports.

Meanwhile, the two sides signed four agreements on visa, customs, youth development and building a Rabindranath Tagore memorial in Sri Lanka.

“The agreement today on cooperation between our customs authorities is a step in that direction. It will simplify trade and reduce non-tariff barriers on both sides,” Modi said.

Modi asserted that India would take active participation in developing the Sri Lankan economy. He said a joint task force would be created soon to make Trincomalee, a city in Sri Lanka, become a regional petroleum hub.

He said in order to meet Sri Lanka’s energy needs, the Indian government would expedite the building of Sampur Coal Power project.