Sri Lanka has long been a priority destination for direct investment from India. Sri Lanka is one of India’s largest trading partner in SAARC. India in turn is Sri Lanka’s largest trade partner globally. Trade between the two countries grew particularly rapidly after the entry into force of the India-Sri Lanka Free Trade Agreement in March 2000.
According to Sri Lankan Customs, bilateral trade in 2016 amounted to US $ 4.38 billion. Exports from India to Sri Lanka in 2016 were US$ 3.83 billion, while exports from Sri Lanka to India were US$ 551 million.
India is among the top four investors in Sri Lanka with cumulative investments of over US$ 1 billion since 2003. The investments are in diverse areas including petroleum retail, IT, financial services, real estate, telecommunication, hospitality & tourism, banking and food processing (tea & fruit juices), metal industries, tires, cement, glass manufacturing, and infrastructure development (railway, power, water supply).
A number of new investments from Indian companies are in the pipeline or under implementation. Notable among them are proposals of South City, Kolkota for real estate development in Colombo (US $ 400 million), Tata Housing’s Slave Island Development project along with Urban Development Authority of Sri Lanka (US $ 430 million), and ‘Colombo One’ project of ITC Ltd. (ITC has committed an investment of US$ 300 million, augmenting the earlier committed US 140 million). Dabur has set up a fruit juice manufacturing plant (US$ 17 million) in May 2013.
On the other hand, the last few years have also witnessed an increasing trend of Sri Lankan investments into India. Significant examples include Brandix (about US$ 1 billion to set up a garment city in Vishakapatnam), MAS holdings, John Keels, Hayleys, and Aitken Spence (Hotels), apart from other investments in the freight servicing and logistics sector.
