Sri Lanka’s renewed push towards an Economic and Technology Cooperation Agreement (ETCA) with India has reopened a much larger debate than trade alone. At stake is a fundamental economic question: can Sri Lanka use deeper integration with its powerful neighbour to accelerate growth, or does the agreement risk creating excessive dependence on a far larger economy?
The debate has intensified following comments by President’s Special Envoy for Foreign Investment Hanif Yusoof, who argued that Sri Lanka’s economic relationship with India has outgrown the existing Free Trade Agreement (FTA) signed 25 years ago. He said the current framework reflects an era when trade was measured mainly through the exchange of goods, while modern economies are increasingly shaped by technology, services, investment flows and global supply networks.
For policymakers, ETCA represents an attempt to reposition Sri Lanka within a changing regional economy. India’s rapid economic expansion has created opportunities in manufacturing, digital services, renewable energy, logistics and tourism. Supporters believe Sri Lanka, with its strategic location and skilled workforce, could benefit by becoming a gateway for Indian and international businesses seeking access to regional markets.
However, critics argue that the central issue is not whether Sri Lanka should engage with India, but whether it can do so from a position of economic strength. With India possessing a much larger industrial base, greater capital resources and a significantly bigger domestic market, some business groups fear that unequal competition could place Sri Lankan companies under severe pressure.
Small and medium enterprises remain among the sectors most concerned. While larger companies may have the capacity to form partnerships and expand into India, smaller businesses worry they could face competition from more efficient and better-funded Indian firms. Industry representatives have previously warned that liberalising markets without adequate preparation could expose vulnerable sectors before they are ready to compete.
Professional groups have also raised concerns over potential implications for employment and labour mobility. Earlier ETCA discussions triggered strong opposition from sections of the professional community, including fears that increased access for foreign professionals could affect opportunities for Sri Lankan graduates. Although supporters have insisted that the agreement would not automatically open the labour market, uncertainty over its provisions contributed to public resistance.
The political sensitivity surrounding ETCA has also been linked to concerns over transparency. Previous negotiations faced criticism because many details were not publicly available, allowing speculation and mistrust to influence public opinion. Observers argue that any renewed effort must involve wider consultation and clear communication if the Government hopes to avoid repeating past controversies.
Hitherto delaying deeper economic cooperation also carries risks. Sri Lanka’s economic recovery depends heavily on attracting investment, increasing exports and integrating into global supply chains. Remaining outside major regional economic networks could limit opportunities at a time when neighbouring economies are aggressively pursuing trade and investment partnerships.
The challenge for Sri Lanka is therefore not simply choosing between openness and protection. The real test is whether policymakers can design an agreement that captures the benefits of India’s growth while ensuring domestic industries, workers and investors are adequately protected.
ETCA’s success or failure may ultimately depend not on the ambition of the agreement, but on the strength of Sri Lanka’s negotiating strategy, regulatory safeguards and ability to convert economic opportunities into broad-based national gains.