Syllabus: GS2/ International Relations
Context
- The India–Sri Lanka Business Forum, organised by Confederation of Indian Industry in partnership with The Ceylon Chamber of Commerce in Mumbai, identified six priority sectors.
Key Areas of Cooperation
- Ports: India and Sri Lanka are exploring cooperation in port infrastructure and maritime connectivity to strengthen trade and regional supply chains.
- Transport and logistics: Improving shipping routes, rail connectivity, warehousing, and cold storage facilities to enhance logistics efficiency.
- Pharmaceuticals: Sri Lanka has shown interest in importing affordable generic medicines from India under the existing FTA framework.
- Digital payments: Sri Lanka is exploring UPI-like cross-border digital payment systems with India.
- Travel and tourism: Expanding tourism and travel connectivity through improved visa facilities and travel circuits.
- Review of the India–Sri Lanka Free Trade Agreement (FTA): The two countries are considering updating the FTA to include pharmaceutical raw materials, logistics equipment, and trade facilitation measures.
Challenges in Bilateral Economic Cooperation
- Trade Imbalance: Sri Lanka has concerns regarding trade deficits with India.
- Regulatory Barriers: Delays in customs clearances and regulatory approvals affect trade efficiency.
- Infrastructure Constraints: Limited logistics and transport infrastructure can increase trade costs.
- Economic Instability: Sri Lanka’s recent economic crisis has affected investor confidence.
- Geopolitical Competition: External powers are increasingly competing for influence in strategic sectors such as ports and infrastructure.
Significance of Sri Lanka to India
- Strategic Location: Sri Lanka lies near the vital sea lanes of communication (SLOCs) in the Indian Ocean through which over 60% of India’s energy supplies and significant trade pass.
- Maritime Security: Vital under India’s SAGAR initiative for ensuring regional stability and countering China’s naval presence.
India and Sri Lanka Relations
- Trade Relations: India-Sri Lanka Free Trade Agreement (ISFTA) in 2000 contributed significantly towards the expansion of trade between the two countries.
- India has traditionally been among Sri Lanka’s largest trade partners and Sri Lanka remains among the largest trade partners of India in the SAARC.
- India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka.
- Cultural relations: The Cultural Cooperation Agreement signed in 1977 forms the basis for periodic Cultural Exchange Programmes between the two countries.
- The Buddhist and Tamil links enhance people-to-people connect and soft power.
- Tourism: India has traditionally been Sri Lanka’s top inbound tourism market, followed by China.
- As per latest data from the Sri Lanka Tourism Development Authority, India is the largest source for tourists in 2023.
- Maritime Security and Defence Cooperation: In 2011, a decision was taken to establish the Colombo Security Conclave which aims to further promote maritime security in the Indian Ocean Region.
- India and Sri Lanka conduct a joint Military exercise named ‘Mitra Shakti’, Trilateral Maritime Exercise “Dosti”, and a Naval exercise named SLINEX.
- Multilateral Forum Collaboration: India and Sri Lanka are member nations of the South Asian Association for Regional Cooperation (SAARC), South Asia Co-operative Environment Programme, South Asian Economic Union and BIMSTEC, working to enhance cultural and commercial ties.
Source: TH
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