India’s Trade Potential and Prospects with Sri Lanka: 1991 to 2015

Abstract

Under the wave of regionalism, India like other developing countries started to integrate at regional level. At the initial stage, it wanted to establish strong trade relations with its neighbouring countries. It (India) signed its first free trade agreement (FTA) with Sri Lanka in 1998, which became operational from 2000. Thereafter, bilateral trade continued to increase with increasing rate. It is in this context, the present study attempts to explore India’s trade potential and prospects with Sri Lanka, utilised revealed comparative advantage (RCA) and trade intensity Index (TII). The results of RCA show that India has strong and sustainable trade specialisation (RCA > 1) in the export of edible vegetables and certain roots and tubers, coffee, tea mate and spices, cotton etc to Sri Lanka. This comparative advantage helps not only to diversify product baskets, but also lead to increased volume of trade. India has no comparative advantage in the import of any product from Sri Lanka. India has intensity of trade with Sri Lanka since 1991. India has sustainable trade potential and prospects with Sri Lanka and been a net exporter to it. Efforts should be made to utilise this potential.