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Submitted by: Mayank Taneja Richa Alagh Ananya Srivastava Rohit Kumar
Introduction
The Prime Minister of the Republic of India and the President of the Democratic Socialist Republic of Sri Lanka signed the Indo-Sri Lanka Free Trade Agreement (ISFTA) in New Delhi on 28th December, 1998. The main objectives of the agreement are: i. ii. iii. Harmonious development of economic relations through expansion of trade Harmonious development and expansion of world trade by removing the barriers of trade Provide fair conditions of competition for trade between the two countries.
After the agreement, Sri Lankas exports have increased rapidly. By 2005, it reached a peak of US$ 566.4 million, a tenfold increase as compared to 2000. India was the 5th largest destination for Sri Lankas exports in 2008. The agreement has facilitated increased diversity and greater value addition in exports from Sri Lanka.
While exports from Sri Lanka peaked in 2005, most of these exports were largely concentrated in two products-Vanaspati and Copper. This poses a problem because these exports arose not due to any distinct comparative advantage that SL held, but due to short-term tariff arbitration by Indian manufacturers investing in Sri Lanka.
Both copper & vanaspathi exports were not seen very favorably in SL as well, since both entailed high import content, limited employment creation & environmental concerns.
The collapse of vanaspathi & copper exports in 2008 led to the substantial decline in total SL exports to India in 2008 to US$ 418 million a 26% fall in export value since the peak in 2005.
References
1. http://commerce.nic.in/ilfta.htm 2. http://www.hcicolombo.org/index.php?option=com_pages&id=76 3. http://www.eximguru.com/hs-codes/Default.aspx 4. http://www.networkideas.org/ideasact/dec09/ppt/Saman_Kelegama.ppt 5. http://www.indianexpress.com/news/india-sri-lanka-to-revise-negativelists/330492/