India and Sri Lanka are set to take the ongoing discussions on the Economic and Trade Cooperation Agreement (ETCA) forward, with the next two rounds of bilateral talks scheduled later this month and in March.

The progress in negotiations is significant for New Delhi and Colombo, as the much-discussed pact was stalled in the past, owing to stiff opposition from some worker unions and hardline Sinhala-nationalist politicians, who saw the agreement as favouring Indian interests predominantly. At least 11 rounds of discussions were held between 2016 and 2019, when the Maithripala Sirisena-Ranil Wickremesinghe administration was in power, but the two signs failed to reach an agreement amid protests in Sri Lanka.

President Ranil Wickremesinghe, who assumed charge as President in 2022 in extraordinary circumstances during the island’s economic crisis when a mass uprising that ousted his predecessor Gotabaya Rajapaksa, has emphasised the need for trade pacts to aid the country’s economic recovery. Earlier this month, Sri Lanka inked a free trade pact with Thailand. India, followed by China, are the other two key partners that Mr. Wickremesinghe is keen to have upgraded agreements with, even as Sri Lankans reel under the painful aftermath of a financial meltdown. 

After talks on the stalled pact resumed under President Wickremesinghe last year, substantial discussions have been held. The Sri Lankan government sees the resumption of ETCA negotiations as “a significant step towards strengthening the economic partnership between Sri Lanka and India.” 

According to an official update issued after the Sri Lankan Cabinet met on Monday, the 13th round of discussions on the proposed ETCA was held in New Delhi for 10 days beginning January 8. Nine sub-committees tasked with looking into various aspects such as goods trade, service trade, rules of the origin and customs procedure and easing the trade held deliberations.

Official sources familiar with the negotiations said the two sides are exploring ways of linking service trade to investments to ensure there is no threat to local labour. “Free movement of individual professionals is not anticipated in the agreement,” said a senior official. Wickremesinghe, on Monday, briefed his Cabinet on the talks, and the 14th round of discussions of the proposed agreement is scheduled to be held on the first week of March 2024, the official press release said.

India and Sri Lanka first signed a free trade agreement in 1998. While the two sides have since attempted to upgrade it multiple times, the attempts proved unsuccessful. New Delhi and Colombo discussed a Comprehensive Economic Partnership Agreement with former President Mahinda Rajapaksa’s government, but his administration saw the agreement as being redundant at the time. 

Upcoming elections

Now, as both India and Sri Lanka prepare for an election year, the two countries are keen to seal the pact, said sources.

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