FTA Exports to India & Pakistan: Sri Lanka's 7.8% Share in December 2025
Sri Lanka's exports under our Free Trade Agreements with India and Pakistan hit a solid 7.8% share of total exports in December 2025, powering regional trade despite a performance dip amid global head...
Sri Lanka's exports under our Free Trade Agreements with India and Pakistan hit a solid 7.8% share of total exports in December 2025, powering regional trade despite a performance dip amid global headwinds. For local exporters in Colombo, Kandy, or Galle, this means real opportunities in tea, garments, and spices—but also a call to tackle rising competition and compliance hurdles head-on.
What Are Sri Lanka's FTAs with India and Pakistan?
Our **India-Sri Lanka Free Trade Agreement (ISFTA)**, in place since 2000, and the **Pakistan-Sri Lanka Free Trade Agreement (PSFTA)** from 2005, slash tariffs to boost bilateral trade. These deals cover thousands of products, giving us duty-free access while supporting local industries like apparel and plantations.Sri Lanka India FTA eliminates duties on over 4,000 product lines, with 4,150 Indian tariff lines now zero-duty for our exports.[1][2] PSFTA offers duty-free access for more than 4,500 products in both directions, turning Pakistan into our second-largest SAARC trading partner after India.[4]
Key Features of ISFTA
- Tariff Elimination: Phased removal of customs duties on 90% of tariff lines, enhancing price competitiveness for our exporters.[1]
- Quotas for Core Exports: India provides 15 million tonnes of tea quota with 50% margin preference, plus benefits for textiles (25% reduction on 528 items) and garments (50% on 8 million pieces).[2]
- Rules of Origin: Requires 35% domestic value-addition or wholly obtained products like tea and spices to qualify for benefits, protecting local jobs.[1][2]
PSFTA Highlights
- Broad Coverage: Both nations have phased out duties on 4,500+ products, with our exports to Pakistan jumping from US$39.2 million in 2004 to US$73.10 million in 2015.[4]
- Top Exports: Pepper, betel leaves, coconut shell, natural rubber, tea, and wood products dominate, ideal for planters in the Central Province.[4]
These agreements have tripled trade with India in a decade and steadily grown ties with Pakistan, but December 2025's 7.8% share signals a dip we must address.Export to Pakistan remains steady, offering diversification from India-focused trade.
December 2025 Performance: 7.8% Share Amid a Dip
In December 2025, FTA exports to India and Pakistan accounted for 7.8% of Sri Lanka's total exports, a slight dip from prior peaks due to global competition and supply chain issues. While ISFTA utilisation hit over 60% for our exports to India in recent years, only 5% of Indian exports to us use it—highlighting our competitiveness.[2] Trade with India surged 48% in 2021 alone, driven by spices, electrical machinery, and apparel.[4]
Why the Dip? Analysing Challenges
Several factors contributed to the performance slowdown:
- Global Competition: India's new EU FTA, concluded January 2026, grants 99.5% duty-free access, pressuring our apparel sector in Europe and indirectly in regional markets.[6]
- Non-Tariff Barriers: Stricter rules of origin and customs delays add costs for SMEs in the Western Province.[1]
- Economic Pressures: Currency fluctuations and energy costs hit exporters, with tea and garments facing volatile prices.[4]
- Low Utilisation: Many locals miss out due to paperwork—over 60% of our India exports use ISFTA, but awareness gaps persist.[2]
| Factor | Impact on Sri Lanka Exports | 2025 Data Insight |
|---|---|---|
| India-EU FTA | Increased competition for garments | Risk to GSP+ benefits by 2029[6] |
| Rules Compliance | 35% value-addition requirement | Blocks 20-30% potential shipments[1] |
| Pakistan Trade Growth | Stable alternative market | US$73M exports (historical base)[4] |
Despite the dip, the 7.8% share underscores resilience—our spices and rubber to Pakistan grew steadily.[4]
Top Products and Opportunities Under These FTAs
Exports to India via ISFTA
Key winners include tea (quota-backed), apparel, spices (cloves, pepper), rubber, and electrical parts. Exports rose 45.4% from 2009-2010 levels, with similar trends into 2025.[4] Locals in the tea estates of Nuwara Eliya can leverage zero-duty entry.
Exports to Pakistan via PSFTA
Pepper, betel leaves, coconuts, rubber, and tea lead, with total trade hitting US$370 million by 2015—momentum carries into 2026.Export to Pakistan suits smallholders in the Sabaragamuwa Province.[4]
India's top imports to us—petroleum (US$1.2B), rice (US$450M), pharma (US$380M)—highlight balanced trade, with 3,932 tariff lines zero-duty.[2][3]
Practical Tips for Local Exporters
Whether you're a garment factory in Katunayake or a spice trader in Matale, here's how to maximise **Sri Lanka India FTA** and PSFTA:
Step 1: Check Product Eligibility
- Visit the Department of Commerce portal for HS code verification.[4]
- Ensure 35% local value-addition or wholly obtained status (e.g., Ceylon tea).[1][2]
Step 2: Obtain Certificates of Origin
- Apply via Export Development Board (EDB) or Customs—free for compliant goods.
- Digital submission via Asycuda system speeds approval to 24 hours.
Step 3: Navigate Compliance and Logistics
- Customs Modernisation: Use single-window clearance at Colombo Port to cut delays.[1]
- Quotas: Track tea (15M tonnes) and garment quotas annually via EDB alerts.
- Risk Mitigation: Hedge currency with forward contracts from Commercial Bank.
Actionable Resources
- EDB Helpline: 1943 for FTA queries.
- Department of Commerce workshops in 2026—register online.[4]
- SLEDB for Pakistan market intel.
Government's 2026 trade review pauses new FTAs but reaffirms ISFTA/PSFTA focus.[7]
FAQ
1. What products qualify under Sri Lanka India FTA?
Over 4,150 tariff lines are zero-duty, including tea, apparel, spices—check HS codes for 35% value-add.[1][2]
2. How do I export to Pakistan duty-free?
Use PSFTA for 4,500+ products like pepper and rubber; get Certificate of Origin from EDB.[4]
3. Why did FTA exports dip to 7.8% in Dec 2025?
Competition from India's EU deal and compliance issues; utilisation still strong at 60% for India.[2][6]
4. Are there quotas for my tea exports?
Yes, 15M tonnes to India with 50% preference—no port restrictions.[2]
5. What's the rules of origin threshold?
35% domestic value-addition for manufactured goods; wholly obtained like spices qualify fully.[1]
6. How has trade grown historically?
ISFTA tripled volumes; PSFTA doubled our exports to US$73M by 2015.[1][4]
Next Steps for Sri Lankan Exporters
Boost your edge in 2026: Audit products for FTA eligibility today, join EDB's free webinars, and diversify to Pakistan amid India competition. With government's trade review wrapping by June, now's the time to scale—contact EDB or Department of Commerce for personalised guidance. Let's turn that 7.8% into double digits together.
Sources & References
- India Sri Lanka Free Trade Agreement: 2026 Product Coverage — deepbeez.com[1]
- India-Sri Lanka Economic And Trade Engagement — hcicolombo.gov.in[2]
- India Sri Lanka Trade 2026 | Top 15 Export Products — sadbhaavspices.com[3]
- Sri Lanka Free Trade Agreement (ISFTA) - Department of Commerce — doc.gov.lk[4]
- Free Trade agreement Between India and Sri Lanka — indiantradeportal.in[5]
- India-EU FTA Explained: Opportunities and Challenges for South Asia — news.fundsforngos.org[6]
- Sri Lanka Freezes Trade Deal Momentum as Government Orders Sweeping Review — slguardian.org[7]
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