India’s trade with Sri Lanka ‘at a standstill’: exporters
New Delhi: India’s trade with Sri Lanka has almost ceased following unrest in the island nation, leaving exporters worried about their payments.
“Our exports and imports have completely stopped. Exporters are very cautious due to the political crisis and payment issues,” Federation of Indian Export Organizations (FIEO) Vice President Khalid Khan said.
However, he expressed hope that once the new government takes office in Sri Lanka, the situation can improve.
Sri Lanka, a country of 22 million people, is facing an unprecedented economic crisis, the worst in seven decades, leaving millions of people struggling to buy food, medicine, fuel and other essential products. The grim situation led to civil unrest.
The country, facing an acute foreign exchange crisis that led to a foreign debt default, announced in April that it was suspending repayment of nearly $7 billion in foreign debt due for this year out of about $25 billion due until 2026. Sri Lanka’s total external debt stands at $51 billion.
FIEO chief executive Ajay Sahai said political stability would help trade resume.
“At present, the goods which are under the line of credit from SBI and Exim Bank are exported to this country and they include key raw materials for industry, pharmaceuticals, fertilizers, food and textiles,” Sahai said.
In 2021-22, India’s goods exports stood at $5.8 billion, up from $550 million in April this year. In the last fiscal year, imports amounted to $1 billion. It was $74.68 million in April 2022.
A free trade agreement between India and Sri Lanka came into force in 2000.
Apart from being one of the major trading partners of Sri Lanka, India is also one of the major contributors of foreign direct investment in this country.
Mumbai-based exporter and chairman of Technocraft Industries, Sharad Kumar Saraf said not only the exporters, companies that have invested there are also “very” concerned about the current unrest.
India’s major investments are in the petroleum products retail, tourism and hospitality, manufacturing, real estate, telecommunications, banking and financial services sectors.
“Trade has dropped significantly. Exporters are worried about their payments. My business with Sri Lanka has dropped 25% since January,” Saraf added.
Sharing similar views, Farida Group Chairman Rafeeq Ahmed said the trade had come to a virtual standstill due to the current crisis in Sri Lanka.
“Exporters are confused. At the moment, no one wants to engage with this country,” he added.
Rajesh Menon, MD, SIAM (Society of Indian Automobile Manufacturers) said that Sri Lanka is a key market for the domestic automotive industry and “we hope that the economic situation will improve in this country at the earliest, allowing the recovery of Indian automotive exports”.
India’s exports to Sri Lanka include engineering products, chemicals, iron and steel, agricultural products, mineral fuels, pharmaceuticals, plastic products and paper goods. Imports include agricultural products, textile products, boats, fruits and nuts.
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