Sri Lanka’s proposed Economic and Technology Cooperation Agreement (ETCA) with India has once again emerged as a defining economic policy debate, with President’s Special Envoy for Foreign Investment Hanif Yusoof arguing that the country’s existing trade framework is no longer equipped to meet the demands of a rapidly evolving global economy. His remarks have reignited discussion over whether ETCA represents an opportunity for economic transformation or a risk to domestic industries.
Speaking at the “India Calling” forum, Yusoof described the 25-year-old Indo-Sri Lanka Free Trade Agreement (FTA) as a product of a different era, one primarily focused on the movement of goods. Today, he argued, economic growth is increasingly driven by services, digital technology, logistics, innovation, tourism, clean energy and integrated supply chains, areas largely untouched by the current agreement.
Supporters contend that ETCA is the logical next step in strengthening bilateral economic ties. By expanding cooperation beyond merchandise trade, Sri Lankan businesses could gain access to India’s vast services market, attract higher levels of foreign investment, integrate into regional value chains and benefit from technology transfer. Analysts also argue that closer economic integration could position Sri Lanka as a strategic logistics and manufacturing hub serving the fast-growing Indian economy.
Yusoof maintained that Sri Lanka’s geographic location, skilled workforce and improving infrastructure provide a competitive advantage that could be leveraged under a modern economic partnership. He also challenged what he described as a protectionist mindset, arguing that economic policy should focus on expanding opportunities rather than preserving the interests of a limited number of businesses.
However, the proposed agreement continues to face significant resistance from sections of the business community and professional organisations. Critics argue that Sri Lanka’s relatively small economy could struggle to compete against India’s vastly larger market. They fear domestic enterprises, particularly small and medium-sized businesses, may face intense competition, while professionals worry that greater labour mobility could threaten local employment opportunities.
Trade experts also caution that the success of ETCA will ultimately depend on its negotiated safeguards. Transparent rules governing investment, dispute resolution, professional standards, immigration, market access and reciprocal benefits will determine whether the agreement produces balanced outcomes. Without clear protections, concerns over unequal competition and regulatory gaps are unlikely to disappear.
The debate also extends beyond economics into public trust. Previous discussions surrounding ETCA generated widespread controversy due to limited public consultation and uncertainty over the agreement’s scope. Economists argue that greater transparency during negotiations will be essential to building confidence among businesses, professionals and the wider public.
As Sri Lanka seeks sustainable growth following years of economic instability, policymakers face a difficult balancing act. Rejecting deeper integration could limit access to one of the world’s fastest-growing economies, while embracing ETCA without adequate safeguards could expose vulnerable sectors to significant competitive pressures.
The challenge for Sri Lanka, therefore, is not whether to engage with India, but whether it can negotiate an agreement that maximises investment, exports and technology transfer while protecting legitimate national interests. The outcome of ETCA negotiations could ultimately shape the country’s economic trajectory for decades to come.
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