Time to rethink export diversification – with India in mind

By Dhananath Fernando

Originally appeared on the Morning

The call to diversify Sri Lanka’s export basket is not new; it’s a conversation that has spanned decades.

For the most part, our approach has relied on supporting Small and Medium-sized Enterprises (SMEs), extending credit, and helping companies find overseas buyers – largely driven by the Export Development Board (EDB).

During the ‘Yahapalana’ Government, Sri Lanka unveiled a comprehensive National Export Strategy (NES) targeting six promising sectors:

• Information and Communication Technology (ICT) and Business Process Management (BPM)

• Wellness tourism

• Boating and shipbuilding

• Electrical and electronic components

• Processed foods and beverages

• Spices and concentrates

In addition, four cross-cutting areas were introduced to complete the export ecosystem:

• Logistics: streamline supply chains and reduce time-to-market

• National Quality Infrastructure (NQI): upgrade testing, certification, and compliance standards

• Innovation and entrepreneurship: promote R&D, tech adoption, and startup growth

• Trade information and promotion: enhance market intelligence, branding, and buyer linkages

This strategy was widely appreciated at the time. Even the EDB Chairman appointed under President Gotabaya Rajapaksa’s administration pledged to take it forward. But strategies need to evolve. And now, the context has shifted.

A case in point is how Ceylon Cold Stores (CCS) – a subsidiary of John Keells Holdings (JKH) – has taken a new route into India. Rather than exporting directly, as it unsuccessfully attempted in the past due to India’s non-tariff barriers, it has now partnered with Reliance Consumer Products. Through this partnership, CCS products will be distributed across 18,000 Indian outlets.

If the venture proves successful, we could see CCS expanding operations further, either producing in Sri Lanka for export or even setting up shop in India. This is a powerful lesson; if we are truly serious about diversifying exports, India is a market we can’t afford to ignore. But the route may not always be direct; it could mean partnerships, joint ventures, or becoming part of Indian supply chains.

And it’s not just consumer goods. While CCS is expanding into India, some Sri Lankan banks, now holding excess US Dollar reserves, are looking to partner with the Gujarat International Finance Tec-City (GIFT City).

Several bank CEOs in Sri Lanka who have already invested have stated that their goal is to support Sri Lankan companies investing in India – or even Indian companies operating here. In fact, many Sri Lankan service sector firms are already functioning in India. This is a clear signal: the momentum has shifted. The landscape is changing and we are slow to adapt.

Meanwhile, India is also reshaping the global trade map. It has already signed a Free Trade Agreement (FTA) with the UK, and is in the final stages of a similar deal with the European Union (EU). Under the UK deal, 99% of Indian exports to the UK will be tariff-free, and 90% of UK goods will get similar access to India – significant reductions even for alcohol products.

Once the EU deal is signed, exporters will have even more incentive to route products from India, especially given Sri Lanka’s uncertain GSP+ status. So, if we try to compete head-on with India in the same markets, we may be setting ourselves up for disappointment. Instead, we should look at how we can complement India – join its supply chains and offer what India alone cannot.

One such overlooked area is electricity exports. Back in 2016-’17, when the NES was developed, the potential of renewable energy in Sri Lanka was limited. Today, that picture has changed dramatically. Solar and wind investments have surged, and with the right policy push, electricity exports to India could become a serious reality.

This example illustrates a broader point: strategies must be dynamic. Markets evolve, technologies advance, and regional power equations shift.

India, for instance, is integrating rapidly with global and regional markets. Sri Lanka can ride that wave, or watch others benefit in our place. With geopolitical winds also shifting – particularly with the West looking for reliable partners in the region – India is too big to be left out of any serious trade or investment plan.

If we play our cards right, Indian growth could also drive investment into Sri Lanka, especially in sectors that support exports. But to unlock that opportunity, we need serious structural reforms:

• Industrial lands must be made available, ideally through private sector-led zones with minimal red tape and a streamlined Board of Investment

• Electricity sector reforms are non-negotiable – both to reduce domestic costs and to enable energy exports

• Trade facilitation through a modernised Customs act is essential to attract investors eyeing India via Sri Lanka

• Debt sustainability must be maintained – no investor will bet on a country flirting with default

• State-Owned Enterprises (SOEs) must be restructured to reduce the fiscal burden and unlock productivity

In short, if we are serious about export diversification, we must acknowledge that the rules of the game have changed. Old models won’t work in a new world. India is no longer just a neighbour; it is a gateway, a competitor, and a partner all at once.

The question is: will we adapt fast enough to matter?