New Delhi: India and Sri Lanka may conclude their long-awaited economic and technology cooperation agreement (ETCA) in FY25, two people aware of the matter said. The ETCA, which builds on an earlier free trade agreement (FTA) implemented in 2000, will enhance bilateral trade between the neighbours. India and Sri Lanka re-launched talks on the ETCA in November 2023 after about a five-year hiatus as both sides are keen to deepen the economic relationship between them. The last round was held in January. “There is a willingness from both India and Sri Lanka to get the agreement done. Talks are progressing swiftly,” said the first person mentioned above, who spoke under the condition of anonymity.
“This ECTA could be concluded during 2024-25,” they added.
Maintaining good trade and diplomatic relations in the region is key for India as it seeks to counter China. So far, India and Sri Lanka have held 13 rounds of talks.
During the latest round, officials assessed the state of play thus far and discussed chapters on rules of origin, dispute settlement, technical and non-technical barriers to trade, among other matters.
Spokespersons of the ministries of external affairs and commerce didn’t respond to emailed queries.
“The 13th round of ETCA negotiations was concluded last month and now in the process of scheduling the next round in Sri Lanka. While substantial progress has been made, the further way forward will be decided at the next round of negotiations on both ETCA & Bilateral Investment Agreement,” the Sri Lankan High Commission said in response to a query from Mint.
Further rounds are expected to be slotted after the general elections. During November, India and Sri Lanka, while reviewing the progress of the ETCA, resolved nine key issues, according to an earlier commerce ministry statement.
Issues such as the quota on apparel and pepper and the procurement of pharmaceuticals were also discussed.
Both India and Sri Lanka have decided to continue the discussion and explore new options for resolution of the matter.
However, further progress in the proposed agreement is expected only after the Indian general elections slated to be held in April-May 2024, said the second person, mentioned above, who too spoke under the condition of anonymity.
Meanwhile, Sri Lanka will also have a Presidential election later in September-October 2024, with incumbent President Ranil Wickremesinghe looking to continue in office.
Since taking office in 2022, Wickremesinghe has pushed for closer ties with India. During his visit to India in 2023, both sides agreed to push forward economic connectivity agreements on power grid connectivity and a petroleum pipeline.
India is a key partner of Sri Lanka, playing a pivotal role in the recovery of its economy during the economic crisis, which started in 2019 and threatened to derail the economy of the South Asian nation.
During the crisis, which peaked in 2022-23, the island nation saw high inflation, near-depletion of foreign exchange reserves, shortage and an increase in prices of basic commodities.
While the IMF extended assistance of $3 billion, India has extended assistance of over $4 billion to Sri Lanka aiding its economic recovery.
India’s financial assistance included credit lines, a currency swap arrangement and deferred import payments.
During the April-December 2023 period, India’s exports to Sri Lanka stood at $2.65 billion, down 36.66% annually, while imports stood at $943 million, up 17.93% annually, according to commerce ministry data.
While India’s overall global trade remained in the deficit during the April-December 2023 period, its trade balance with Sri Lanka has been on positive at $1.71 billion.
