India and Sri Lanka Eye FY25 Conclusion for Economic Cooperation Agreement
India and Sri Lanka are on track to finalize their Economic and Technology Cooperation Agreement (ETCA) during the fiscal year 2024-25, according to sources familiar with the matter. The ETCA, building upon a prior free trade agreement (FTA) implemented in 2000, aims to bolster bilateral trade between the two neighboring countries. Talks on the ETCA resumed in November 2023 after a five-year hiatus, reflecting the shared commitment to deepen economic ties. The 13th round of negotiations concluded recently, and there is optimism that the agreement could be concluded in 2024-25.
Maintaining robust trade and diplomatic relations in the region is crucial for India's strategic interests, particularly in countering China. The 13 rounds of talks have covered various aspects, including rules of origin, dispute settlement, and technical and non-technical barriers to trade. While significant progress has been made, the final steps are expected to be decided in the upcoming rounds, with further progress likely post the Indian general elections in April-May 2024.
India and Sri Lanka have resolved key issues during previous discussions, addressing matters such as quotas on apparel and pepper, as well as pharmaceutical procurement. However, the actual progress is anticipated after the Indian elections, and further discussions are likely after the general elections and Sri Lanka's Presidential election scheduled for September-October 2024.
Sri Lanka, under the leadership of President Ranil Wickremesinghe, has sought closer ties with India. Both countries are exploring economic connectivity agreements, such as power grid connectivity and a petroleum pipeline. India has been a significant partner in Sri Lanka's economic recovery, extending assistance of over $4 billion, including credit lines, currency swaps, and deferred import payments.
During the April-December 2023 period, India's exports to Sri Lanka reached $2.65 billion, with imports standing at $943 million. Despite India's overall trade deficit globally during this period, its trade balance with Sri Lanka remained positive at $1.71 billion.
