India's Informal Trade with Sri Lanka and Nepal: An Estimation

Abstract

India has signed bilateral free trade agreements (FTAs) with both Sri Lanka and Nepal. Despite such agreements, informal trade continues to thrive in the South Asian region. Not much empirical evidence seems to exist on the magnitude and composition of such trade. Using the Delphi technique, the study makes an attempt to estimate India's informal trade with Sri Lanka and Nepal through an extensive primary survey conducted in the three countries, covering several cities. Corresponding country estimates of Indo-Sri Lanka and Indo-Nepal informal trade, provide a possible range within which the estimates are likely to lie. The study shows that total two-way informal trade between India and Sri Lanka is almost a third of formal trade, while that between India and Nepal is almost as large as formal trade. The study also points out the lacunae in the Indo-Sri Lanka and Indo-Nepal FTAs and suggests how they can be addressed so that informal trade can be brought within the ambit of formal trade.