India-Sri Lanka Free Trade Agreement (Safta)

The India-Sri Lanka Free Trade Agreement (SAFTA) was signed in 2000 to boost trade relations between the two countries. SAFTA was the first bilateral free trade agreement signed by India, and it opened up new avenues for trade and investment between the two countries.

Under SAFTA, India and Sri Lanka agreed to eliminate tariffs on a wide range of goods. This meant that products from each country would be able to enter the other country’s market without being subject to customs duty. The agreement was aimed at increasing the volume of bilateral trade between India and Sri Lanka and reducing trade imbalances.

In the years since SAFTA was signed, India and Sri Lanka have seen a significant increase in bilateral trade. The agreement has helped to diversify trade between the two countries and has enabled Sri Lanka to export more of its products to India. The main items that Sri Lanka exports to India are tea, textiles, and apparel, while India exports petroleum products, machinery, and pharmaceuticals to Sri Lanka.

One of the key benefits of SAFTA is that it has helped to reduce the cost of goods traded between India and Sri Lanka. With the elimination of tariffs, businesses in both countries have been able to reduce their prices and make their products more competitive. This has led to increased demand for goods from both countries, which has boosted economic growth and created jobs.

Moreover, SAFTA has encouraged investment between the two countries. Indian companies have invested in Sri Lanka’s tourism, infrastructure, and real estate sectors, while Sri Lankan companies have invested in India’s information technology and renewable energy sectors. These investments have led to the transfer of technology and knowledge between the two countries, which has helped to improve productivity and competitiveness.

However, SAFTA has faced some challenges in recent years. The trade imbalance between India and Sri Lanka has widened, with India’s exports to Sri Lanka increasing more rapidly than Sri Lanka’s exports to India. Moreover, there have been concerns about non-tariff barriers to trade, such as sanitary and phytosanitary measures and technical regulations, which have impeded trade between the two countries.

Despite these challenges, SAFTA remains an important trade agreement between India and Sri Lanka. The two countries have continued to work together to improve the agreement and address the challenges it faces. With the increasing focus on regional trade and cooperation in South Asia, SAFTA is likely to play an even more important role in the future.

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