As Sri Lanka looks to deepen its trade ties with India, the persistent imbalance in the trade relationship continues to raise concern.
With India exporting a wide range of essential goods to Sri Lanka, and Sri Lankan exports remaining concentrated in a few traditional sectors, the gap has proven difficult to close. Newly launched in Colombo, the Lanka India Business Association (LIBA) is aiming to shift that dynamic.
In an interview with The Sunday Morning Business, LIBA President Santosh Menon shared his insights on the structural reasons behind the trade deficit, emerging opportunities in regional Indian markets, and how LIBA planned to support Sri Lankan businesses in navigating the complexities of the Indian market.
Following are excerpts:
From your perspective, what are the main structural or policy-level reasons for Sri Lanka’s persistent trade deficit with India and how can these be effectively addressed?
India is a large, more diversified economy, and has products of critical need to Sri Lanka that it imports. On the other hand, Sri Lanka’s export basket mainly comprises tea, spices, and garments, with other products needing to be added to it as well.
There is also an issue of complementarity. Indian imports, at a great price point, fulfil critical needs in Sri Lanka, whereas many of the products Sri Lanka exports, like tea, have substitutes within India or from other countries.
Sri Lanka imports heavily from India for its industry. For example, due to its geographical proximity, India provides key products such as raw cotton for the functioning of the apparel industry. A structural imbalance is thereby created since Sri Lanka’s basket of exports is not as large as India’s and its import basket for critical items cannot be curtailed.
What sectors or industries in Sri Lanka do you believe hold the most potential for export growth to the Indian market in the near to medium term?
At LIBA, we are partnering with a Sri Lankan think tank to focus on five South Indian markets, with the goal of assessing their needs and identifying sectors within Sri Lankan industries that can meet those demands. During a recent visit to Kerala, I observed a significant opportunity in the processed meat sector, for instance.
While we have an initial understanding of our strengths, LIBA plans to conduct a more thorough and systematic study. We aim to share our insights with all major business associations in Sri Lanka to help guide relevant businesses towards these emerging opportunities.
How does LIBA currently support Sri Lankan businesses in entering or expanding in India, and what new initiatives are being planned?
We launched just under a month ago. We will provide access to business advisers in India who can handhold Sri Lankan entities to enter Indian markets. We have an online offering on the anvil, which we will unveil soon and which can be a technology platform to facilitate business-to-business interactions.
Are there specific regulatory or logistical barriers that LIBA is working to ease for Sri Lankan Small and Medium-sized Enterprises (SMEs) looking to access Indian supply chains or distribution networks?
We are committed to working with both the Indian High Commission in Sri Lanka and the Government authorities here to ease any such non-tariff barrier, if they exist. We will use the media to focus attention on any such impediments.
In our view, Sri Lankan businesses benefiting from India’s boom and Indian businesses bringing in much needed Foreign Direct Investments (FDIs) are almost existential considerations, and we are fully engaged in ensuring its success.
How can improved cross-border collaborations – such as joint ventures, knowledge sharing, or technology transfers – help level the playing field for Sri Lankan entrepreneurs?
The Sri Lankan Government and the Indian High Commission have launched several initiatives focused on start-ups, partnerships with leading educational institutions, and a digital transformation project sharing India’s expertise with Sri Lanka.
It is important for Sri Lankan entrepreneurs to actively engage with the right local associations to leverage these opportunities, strengthen their offerings, and enhance their competitiveness both locally and globally.
What role can bilateral trade agreements or subnational partnerships (such as with Indian states) play in deepening trade ties, and how can LIBA help facilitate these linkages?
Trade agreements play a vital role in facilitating smoother business-to-business interactions. One such agreement, the Economic and Technology Cooperation Agreement (ETCA), has been under discussion for several years. From a Sri Lanka-India perspective, finalising and activating this agreement could be an important step towards deeper economic engagement with the Indian market.
At LIBA, we are committed to encouraging ongoing dialogue with all stakeholders in order to highlight the importance of concluding such agreements. It is important to note that trade agreements must be made at the national level with India, rather than individually with separate states.
Finally, what would be your key message to emerging Sri Lankan entrepreneurs who are eager to explore India but may be uncertain about where to begin or how to position their products?
Sri Lankan products have a reputation of being top quality. Whether it’s cinnamon, tea, tourism, or garments, products coming out of Sri Lanka are worth paying premiums for. Therefore, we need to believe in ourselves.
India as a growing economy is also hungry for high-quality products and there is an opportunity for us in India. We need to approach India strategically instead of being daunted by its size.
We at LIBA have learnt how to approach the Indian market. We will provide the right advisers to guide clients and try to help them with market entry. Of course, as an entrepreneur one would need patience, resilience, and conviction on staying the course till successful outcomes are achieved, which is true for all businesses.