Trade assumes new colours since FTA

New Delhi, March 27 | Updated: Mar 28 2005, 06:15am hrs
Bilateral trade with Sri Lanka has jumped 195% to Rs 6,961 crore after the free trade agreement was operationalised in March 2000. Simultaneously, there has been a dramatic change in the composition of trade. Post-FTA, Sri Lankas exports have grown at a faster rate (366% to Rs 893.5 crore) compared to Indias at 111% to Rs 6,067 crore. In the same period, Indias world trade increased by around 60%.

The major push in Sri Lankan exports has been in the non-ferrous metals sector, mainly copper. Its exports have gone up from Rs 51.75 lakhs in 1999-2000 to Rs 3,777.4 crore in 2003-04. This category grew to account for 42.2% of overall Lankan exports to India in 2003-04. However, with the tightening of the Rules of Origin (RoO) norms, its weight has slipped to 30% for imports in the first half of this fiscal. Other growth drivers include capital goods and electronics goods.

Tea imports, which Indian industry had been afraid of, fell 63.72% from Rs 8.73 crore in fiscal 99-00 to Rs 3.16 crore in financial year 2004.

Another commodity, spices, which was growing at 287.74% during 1997-2000, saw a more sedate increase of 32.72% in the post-FTA era.

Indian exports to Sri Lanka too have seen a sea change after the FTA. While the manufacturing and agriculture exports posted healthy growth rates of 108.26% and 128.14%, respectively, their share in the overall pie has declined due to the rise of petroleum products (POL) exports. POL exports grew from zero to Rs 1,185 crore in 4 years, presumably on account of IOC setting up a subsidiary in Sri Lanka.

The product category now accounts for nearly 22% of Indias total exports to Lanka. The share of POL products in Indias global exports basket has grown from less than 1% in fiscal year 2000 to about 5.5% in 2004.