India-SL Economic Relations in Modi’s India

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By 2017-11-23

The Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI) and the Institute of Policy Studies of Sri Lanka (IPS) hosted their first joint lecture, featuring former Finance Secretary of India Dr S Narayan, who spoke on 'India-Sri Lanka Economic Relations in Modi's India', stated a press release. The lecture was held on 20 November 2017, followed by an expert panel discussion featuring IPS Chairman and National University of Singapore Lee Kuan Yew School of Public Policy Associate Professor Dr Razeen Sally. The discussion was moderated by LKI Global Economy Programme Chair Dr Ganeshan Wignaraja.

Dr Narayan focused on three significant topics: trade, foreign policy and the Indian economy, in the age of Prime Minister Modi, the release added. While recognizing that Sri Lankan businesses have made significant headway in the Indian economy, he emphasized the importance of expanding trade relations beyond Tamil Nadu, stating that "today, the opportunities in South Indian states are much more. There is the opportunity to say South India no longer means Tamil Nadu to the exclusion of everybody else." Dr Narayan also argued for the formalization of informal trade, as this sector presents a growth opportunity in marketable goods. He stressed that it was crucial to "move the discussion away from the larger picture to the more business picture, and to deal with issues that are facing businesses and not issues that are facing Governments."

Dr Razeen Sally spoke about the bilateral trade deficit between India and Sri Lanka, stating that the existence of this deficit was not necessarily negative for Indo-Lanka relations. He argued that, despite perceptions fuelled by the local media, the trade deficit is not caused by unfair trade practices on India's part and that "the arguments that the trade deficit is bad are, of course, economically illiterate arguments." Instead, Dr. Sally emphasized that domestic barriers in Sri Lanka affect export potential. He also highlighted that creating a domestic reform agenda favouring unilateral trade liberalization and fostering domestic competitiveness would encourage foreign direct investment in the Sri Lankan economy.

Dr Ganeshan Wignaraja noted that warming political ties between Sri Lanka and India since 2015 had supported Indian involvement in some infrastructure projects in Sri Lanka, including the Mattala airport and urban development in Trincomalee. He suggested that improved bilateral trade and FDI flows could arise from the close geographical proximity of the two countries. Dr Wignaraja mentioned that trade remedies could reduce risks linked to sudden import surges. The high-profile event drew a diverse group of participants, including policymakers, scholars from universities and think-tanks, media, representatives from the private sector and civil society and students, who had the opportunity to ask questions and engage in a broader discussion of the future prospects of Indo-Lanka relations, the release concluded.

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