Trade Openness and Bilateral Trade Relations Between India & Sri Lanka: An Empirical Analysis

Author(s)	Dr. Gagan Deep
Country	India
Abstract	The paper will analyze the extent to which India and Sri Lanka rely on one another with respect to the trade based on trade openness (bilateral trade as a share of GDP) during 2006-2025. The findings indicate that there is a drastically skewed relationship. On average bilateral trade is 6.61 percent of GDP of Sri Lanka, compared to only 0.23 percent of India, making Sri Lanka the much more trade-dependent partner. In 2022, opening to 9.90% is the highest ever recorded in Sri Lanka, but it was a crisis dependence spike, not evidence of a healthy trade growth. The highest openness of India was only 0.35 in 2014. Another country with an enduring trade surplus is India, but Sri Lanka has exported to India to an all-time high of USD1.54 billion in 2025. India has a vast potential to expand this relationship, its economy being many times bigger. The India Sri Lanka Free Trade Agreement (ISFTA) can be given credit in the growth of bilateral trade as it gradually eliminated trade barriers and saw complete liberalization in 2008. As a strategy to distribute the fruits of ISFTA more evenly, the future would require export diversification of Sri Lanka, reduce the trade imbalance and maintain the stability of the Sri Lankan economy.
Keywords	Trade Openness, India-Sri Lanka Trade, ISFTA, Bilateral Trade, Trade Dependency
Field	Sociology > Economics
Published In	Volume 17, Issue 11, November 2026
Published On	2026-11-10

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