India Sri Lanka Free Trade Agreement : Complete Documentation
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Sri Lanka
IndiaTrade Agreement Information
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Negotiations launched
2014-01-01
Free trade agreement
Plurilateral
Country-Country
Agreement highlights include:
• Tariff Elimination: The ISFTA facilitates the phased removal of customs duties on over 4,000 product lines, significantly lowering the cost of bilateral trade for manufacturers and consumers.
• Preferential Market Access: Sri Lankan exporters benefit from duty-free entry and specific quotas for core exports such as tea and apparel, bolstering the island's primary industrial sectors.
• Rules of Origin: The agreement mandates a 35% domestic value-addition threshold, ensuring that trade benefits support local industrial growth and prevent third-party trade deflection.
• Sectoral Expansion: Indian exporters gain preferential access to the Sri Lankan market for machinery, transport equipment, and chemical products, supporting regional infrastructure development.
• Strategic Integration: As India's first FTA, this framework transformed bilateral relations from aid-dependency to a robust trade-driven partnership, tripling trade volume within a decade.
Analysis of Key Features:
| Area of Focus | Key Feature | Economic Benefit |
| Market Access | Removal of tariffs on 90% of tariff lines. | Enhances price competitiveness for exporters and broadens consumer choice in both nations. |
| Sector-Specific | Dedicated quotas for textiles and agriculture. | Provides stability and guaranteed market share for Sri Lanka's vital garment and plantation industries. |
| Trade Facilitation | Customs modernization and cooperation. | Reduces administrative hurdles and transaction costs, accelerating cross-border logistics for SMEs. |
| Investment | Protection for cross-border capital flows. | Encourages Indian FDI into Sri Lankan manufacturing, energy, and service sectors, fostering long-term growth. |
| Regulatory Standards | Harmonization of technical requirements. | Lowers non-tariff barriers, ensuring product safety and simplifying compliance for regional businesses. |
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