Indian investment into Sri Lanka zooms

The Sri Lankan government has set a target of $3 billion (around Rs 13,500 crore) FDI inflow into the country by 2015, of which 15-20 per cent is expected from India. The trade between the two countries is expected to touch $900 million, said Sam Wijesekara, counsellor (Commercial), Sri Lanka Deputy High Commission in Chennai.

The country has attracted FDI worth $516 million from various countries.

During January-October this year, the Sri Lankan government granted approvals to nine Indian projects with an estimated investment of $168 million (around Rs 756 crore).

Since the end of its 25-year civil war in 2009, the country has been working to improve the investment climate, including making fiscal and tax reforms under the guidance of the International Monetary Fund.

In 2005, FDI flow from India to Sri Lanka was $18 million, which peaked in 2008 at $126 million and now India stands among the top five investors in Sri Lanka, with $ 457 million on a cumulative basis.

The top investments include Cairns India - oil exploration, Bharti Airtel, Indian Oil, Piramal Glass, Tata group  - Tata Communication, Taj Hotel, Ashok Leyland, Ultra Cement, Ceat, L&T and Asian Paints. Besides, four banks including State Bank of India, Indian Overseas Bank, Indian Bank and ICICI also have branches in the island nation, said Wijesekara.

During the first half of 2011, FDI inflow from India was $47 million, according to the Sri Lanka Board of Investment (BoI), which added that During January-October this year, the Sri Lankan government granted approvals to nine Indian projects with an estimated investment of $168 million. At least, eight of these have begun commercial operations. This is a big jump as last year approvals were granted for 15 projects with an estimated investment of $ 72 million.

Investments flow from India to Sri Lanka in 2009 was $77 million and increased to $110 million in 2010.

Companies, which have recently entered Sri Lanka include Shriram EPC, a renewable energy company and Marg, an infrastructure company from Chennai.

According to Wijesekara, real estate, IT/BPO, hotels, food processing are some of the key sectors driving the investments into Sri Lanka from India.

The last few years have also witnessed an increasing trend of Sri Lankan investments into India, said Wijesekara. He added, the investments in India include Carsons Brandix (around $ 1 billion to set up a garment city in Visakhapatnam), MAS holdings, John Keels, Hayleys, and Aitken Spence (Hotels). There are also investments in the freight servicing and logistics sector from services industry.