Sri Lanka Economic Crisis – Impact on Auto Exports from India

13 April 2022

Sri Lanka, an island nation, is experiencing an economic and political crisis, with protesters taking to the streets against the government’s policies. Record inflation, debt in billions due to years of accumulated borrowings, crucial sectors witnessing a sharp fall in demand thanks to the Covid-19 pandemic, lack of foreign currency, and the alleged government mismanagement are among the reasons that have dragged Sri Lanka into not just an unprecedented economic crisis but also a massive political turmoil.

The situation in Sri Lanka has forced many Indian automotive firms to stop exports of vehicle kits and production as well. Shipments of vehicle kits including those for light commercial vehicles, trucks, and buses have declined sharply as the neighbouring country is grappling with precarious forex reserves and fuel shortages.

India’s auto exports to Sri Lanka

Sri Lanka’s economic problems have had an impact on auto exports from India and severely depleted demand. The island nation is a small but important export market, particularly for light commercial vehicles (LCVs) from India. According to our database, motorcycles were the top-most product under the vehicle category exported from India to Sri Lanka in 2020. However, exports of Indian motorcycles to Sri Lanka fell considerably due to the Sri Lankan government’s decision to ban the import of motorcycles from India.

India’s other major auto-export products to Sri Lanka in 2020 and 2021 were parts & accessories for tractors, tractors (other than heading 8709), parts & accessories for motorcycles & bicycles, and motor cars. Below given chart shows the dollar amount of these commodities.  

India’s auto exports to the world

Motor cars and parts & accessories for tractors are the largest export commodities under the vehicles category of India. Vehicles share over 5% of the total Indian export categories. Here is a look at India’s exports of top auto products with dollar amounts reported in 2020 and 2021.

Who imports Indian auto products?

Sri Lanka’s share in value in India’s top export partners of auto products was 1% in 2021. The United States of America is the biggest importer of Indian automotive commodities accounting for over 15% of total exports. The U.S. was followed by Mexico, South Africa, Bangladesh, Nepal, Nigeria, the United Arab Emirates, Saudi Arabia, Turkey, and Colombia. Below given chart shows the value in percentile of these countries recorded in 2021.

Sri Lanka is now seeking financial support from the International Monetary Fund (IMF) and has also asked for help from China and India. In March, India issued a credit line of $1 billion to Sri Lanka. There is still much uncertainty about what comes next; national consumer price inflation has almost tripled, from 6.2% in Sept 2021 to 17.5% in Feb 2022. And Sri Lanka has to repay about $4 billion in debt over the rest of this year, including a $1 billion international sovereign bond that matures in July month.