India and Sri Lanka being close neighbors', enjoy an inseparable link which is reflected is almost all the aspects in both the countries. In context to the current business scenario of globalization, this intimacy proves to be a noteworthy connection in regards to the economic, and trade ties.

Many initiatives were taken in the past decade to strengthen the trade relations amid the two countries. The India, Sri Lanka Free Trade Agreement (ISFTA) signed in 1998 has broadened the way and has opened a new era in history. The agreement emphasizes on expansion of trade, removal of trade barriers, and harmonious development of economic relations between India, and Sri Lanka. It resulted in substantial growth in trade and investments.

Current economic situation has enabled Sri Lanka to achieve its full potential. Abundant availability of human work force and sustained investment in education and health has set Sri Lanka on high growth trajectory. They have been a value addition to the caliber of the country, and have mitigated the effects of the global economic crisis. These recent developments are opening new windows for Indian investors. India's trade relations with Sri Lanka have been very friendly during the past years. Proximity and history has nurtured the trade relations between the two countries.

After the ISFTA, exports from Sri Lanka to India increased considerably and reached $515.3 million USD in 2007. This was an increase of 838% over a period of seven years. India proved to be the third largest country for exports from Sri Lanka. Simultaneously, Indian exports to Sri Lanka also increased reaching $2,610 million USD in 2007. India was the biggest importer for Sri Lanka (Source: lankabusinessonline.com). Free Trade Agreement also enables Indian investors to manufacture goods in Sri Lanka, and export it to India.

Sri Lanka's apparel industry; despite the economic downturn and hostile environment, is a generator of huge volumes of foreign exchange revenues. Good ethical standards in the country's apparel industries and their scrupulous loyalty to the rules and regulations have paved way for its success. Indian economy is been predicted by economic analysts to grow by 7% during 2009, standing to be one among the least affected countries by the global recession.

Sri Lanka is currently a lucrative destination for Foreign Direct Investments (FDI). India is one of the top five countries investing in Sri Lanka's business and trade since 2007 constituting to 6.5% of the total FDI stock, other countries being US, UK, Hong Kong, and Singapore. FDEI inflows into Sri Lanka during 2001-07 accounted to 16% of the total investments.

By managing economic bilateral relations with India, Sri Lanka can achieve quick and enormous economic development. India is enriched with the potential to manage its own growth momentum, amidst the global turmoil. By demonstrating a partnership with Sri Lanka, it will gain all the benefits of a productive partnership. India has enormous potential to produce vigorous growth and ameliorate its business structure.

References:

1. http://www.dailynews.lk
2. http://commerce.nic.in