Social analysis.
The main argument made by many professionals in the health sector is that ECTA can be severely affected by the health standard of Country. Since the rule of doctors in that country is not as good as Sri Lankan one, it could severely affect the health condition of our domestic people. The argument has been made around some statistical comparisons.
According to the given statistics in 2016, there is a vast difference between health condition in Sri Lanka & India. The life expectancy of Sri Lanka is 75 years while India only has 68.3 years. The adult mortality rate has been 276 in Sri Lanka when it has been 362 per 1000 people in India. Also, the infant mortality rate was significantly high in Indian compared to Sri Lanka. This can be taken as a sign of an adverse health service in India. Most of the Doctors in Sri Lanka is complaining that through ECTA there will be lousy performing health service will stabilize here that can hinder the health condition of Sri Lanka.
According to 2015 statistics at CIA factbook, there are 2118100 HIV/AIDS infected people in India while Sri Lanka had 4200 people. Also, India is categorized as very high risk in major infectious diseases while Sri Lanka is in a high-risk category. So, there can be a possibility to spread those contagious diseases in Sri Lanka from the free movement of people if there isn’t a proper mechanism to monitor.
Economic analysis
According to neo, classical trade theories, trade between goods or services is beneficial when there a difference between taste (demand) for products. So, there is a possibility to increase consumption in both countries if there is a trade between India & Sri Lanka. Also, when comparing the market size of two states, Sri Lanka is quite a small market compared to India. While Sri Lanka has 20 million of population, India has 1.3 billion people. Sri Lankan service providers have a significant advantage from ETCA agreement by getting the opportunity to cater to a big market.
Also, in Sri Lanka, there is a monopolistic situation in consultation or channeling service. So, there is a third level of price discrimination present in those services. People are paying higher prices for the services that they receive. The gap between marginal cost and the marginal benefit is enormous. By importing those services from India could lead to reducing those prices while industries becoming more competitive. Ultimately people would be beneficial by consuming low-priced services.
Also, currently, there are some labor deficiencies in some service sector industries. Especially in the IT industry. By importing deficit units of labor from India can eliminate the excess demand in that sector while increasing countries GDP indirectly.
Because of these labor deficiencies, the labor cost is high in those sectors. This lead to an increase in the price of the final good. When analyzing the salaries of qualified software engineers in two countries in Sri Lanka, there are higher salaries compared to India. So, the final product if think it’s a software it would have a high price because of this problem. With low-cost Indian service providers, our producers could make the product at a lower cost which enables to compete with other products.
Another vital aspect is India is the major tourist arrival country to Si Lanka currently. In the year 2016, there were 356729 tourist arrivals to Sri Lanka. Also, when compared to the 2010 statistics, the visitors have been grown up by 185% when it comes to 2016. ETCA is permitting income Indian service providers to operate in the tourism sector in Sri Lanka. Having Indian cultured service providers in the tourism sector would be attractive for Indian tourist and could end up having increased the number of arrivals from India. Also, there would be room for high-quality service received by Indian tourist since they will much familiar with an Indian setting.
The critical aspect of going to be included in the ETCA agreement is that the removal of Non-trade barriers. Unique insight has been given to this case in the event of the CEPA agreement. Primarily it has been focused to remove the port restrictions that exhibit with our export to India. Removal of non-tariff barriers will enhance shipping to India.
But in economic view, Sri Lanka is disadvantageous when analyzing the potential impact on the labor force. According to the statistics, India currently has 48.26 million people unemployed. This is twice greater than that of what Sri Lanka’s population. If these unemployed people move towards Sri Lanka, can made Sri Lankan people unemployed if they cannot compete with that low-cost arrives. High unemployment will hinder the growth of the country, and ultimately, this can lead to diminishing the standard of living of Sri Lankan people.
Sriram panchalingam has posted in his tweet account in 2015 Sep 18, there were 2.3 million applications received for 369 clerical jobs in Uttar Pradesh India. There were 152000 graduates plus 255 Ph.D. holders who have applied for this position that pays only 16000 NIR per month. With this kind of situation, there can be an enormous pressure coming from India unemployed population into our labor market.
Also, there can be a considerable brain drain issue in the Sri Lankan context since the arrival of Indian service providers would reduce the salaries in Sri Lanka. Currently, there is a high brain drain rate in Sri Lanka. In the year of 2015, 6257 professional workers have left the country. It has increased by the speed of 16.5% compared to 2014. In 2015 there are 82098 skilled workers has left the country for work abroad. It has increased by 12.2% compared to 2014. The leading issue caused by this brain drain problem is the differences in the salaries in countries. With this situation inflow of Indian workers will reduce salary levels more that will increase brain drain issue.
Another aspect is that still there is a high and increasing balance of payment Sri Lanka with India. In 2015 BOP trade deficit with India is accounted as -3530.27 US $ in a million. By ETCA, there is a possibility of increasing our trade deficit more. If so we would be worse off from the agreement. As well as growing trade deficit will severely impact on the foreign reserves in Sri Lanka. Having a trade deficit will increase exposure to foreign reserves.
A primary reason for not being able to get the best out of ISFTA is having a competitive trading structure between the two countries. This theory could apply even for the case of ETCA. Having
labor endowment economic structure there is a barrier to be a success from a service liberalization system.
In the classical theory of economics when there is competitive advantage between the two countries is related to different goods can be beneficial from trade. The comparative strength of a specific product only lies with one country. So, in the view of this theory, there is a conflict when analyzing the offer list of two countries in the proposal to the ETCA. Many services are going to be offered by both countries. Those are,
1. Computer Related Services
2. Telecommunication Services
3. Health and Social Services
4. Tourism and Travel Related Services
5. Transport Services
Only two services are not on the list of Indian offers. So, the point is if Indian services have the comparative advantage of issuing those, Sri Lankan people miss the market because of having comparatively disadvantage. Then it seems like only two functions are liberalized to Sri Lanka. It reflects that Sri Lankan authorities have not correctly analyzed the capabilities & competencies that lies with services which can cater to the Indian market.
Political impact
India is a powerful country compared to Sri Lanka. Some professionals argue that the ETCA agreement is going to sign by force. According to them, India is influencing our politicians in signing that agreement. Also, another aspect they emphasize is after signing ETCA they going to cater to the best sectors in our service sector. By taking access to the best industries in our service sector, they could have able to acquire higher portion from our GDP and high power over our economy ultimately.
