Former Central Bank Governor Indrajit Coomaraswamy called on Sri Lankan policymakers to take advantage of the size of the Indian market speaking at a joint Takshashila Institution and Pathfinder Foundation webinar on October 9.
“Sri Lanka is like an unsinkable aircraft carrier parked 20 miles off the coast of India. Sri Lanka is important to India and India is a great opportunity for Sri Lanka.
“You can see India’s neighbourhood policy gain traction on the ground. It is in India’s strategic interests to have stability on its southern border given the sensitivities in the Northern border and that a lot of the strategic assets are in the South.”
Sri Lanka has a trade deficit of US$ 3.1 billion in favour of India however only 5% of India’s exports to Sri Lanka only comes on a concessional basis due to the Free Trade Agreement. Sri Lankan exports to India under the FTA accounted for US$ 490 million while total exports to India accounted for US$ 763 million. Coomaraswamy noted non-tariff barriers to Sri Lankan exporters.
For the Indo-Lanka Free Trade Agreement to be successful he noted that there should be reciprocity and at the same time understanding the need for differential treatment. The positive list, the negative list, and the transition periods for liberalisation in the agreement showed that India understood this principle. Coomaraswamy said if ‘make in India’ succeeds then it will be an opportunity for Sri Lankan firms to plug into these supply chains. India and Maldives have increased relations following the recent election in the Maldives. Grid connectivity between the two countries is a possibility. Coomaraswamy called on Sri Lanka to take advantage of the capital from the Belt and Road initiative with a stronger commercial relationship with China. He said, “If you look at the 2015 to 2019 period, India was Sri Lanka’s largest trading partner, it was the 3rd most significant source of FDI, and it was the largest source of tourists. India has been a source of concessional assistance and grants. The EXIM Bank of India has provided US$ 1.8 billion mainly for railway development. The grants assistance has gone to the rehabilitation of conflict-affected areas.”
A US $15 million grant was recently given following the talks between Prime Minister Modi and Prime Minister Mahinda Rajapaksa. India was the first country to assist the pandemic. India provided the major financial support for the all-island ambulance service.
