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May 10, 2009 (LBO) – India is one of the world’s most dynamic economies and attractive markets with which Sri Lanka continues to have strong relations by reason of proximity and history. India’s relations with Sri Lanka have, for the most part, been friendly and are probably the best that it enjoys with its non-micro-state neighbors.

India’s first bilateral free trade agreement (FTA) was with Sri Lanka and resulted in considerable growth in trade and investment, though not without some frictions, which for the most part have been addressed. The Indian economy, which grew at 5.3 percent even in the fourth quarter of 2008 (when Sri Lanka’s other export destinations were experiencing negative growth) and is expected to grow at around 7 percent in 2009, is likely to be among the least affected by the global economic crisis.

This suggests significant benefits to both countries from building on the existing foundation of a bilateral disciplinary framework in trade in goods. Sri Lanka can benefit from a larger market that will allow the realization of economies of scale, the ability to integrate into sustainable and low-cost value chains and greater investment.

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