Sri Lanka hopes to set terms of economic pact with India by year end

New Delhi: Sri Lanka hopes to hammer out an economic partnership deal with India this year, its prime minister said on Tuesday, seeking to strengthen the Indian Ocean island's ties with its big neighbour and reduce its dependency on Chinese investment.

Prime Minister Ranil Wickremesinghe, visiting New Delhi on his first visit abroad since winning a general election last month, said voters had given his government of national unity a mandate for trade and investment with India.

"We are looking at a permanent agreement on cooperation on economic affairs - trade, investment and technology - which is essential for development," Wickremesinghe told reporters after meeting Indian Prime Minister Narendra Modi.

Last month's poll win was the second shoe to drop in an electoral cycle that began in January with reformist President Maithripala Sirisena's defeat of Mahinda Rajapaksa, the nationalist leader who crushed an insurgency by ethnic Tamil rebels in 2009 and attracted billions of dollars in Chinese investment.

Modi, since gaining power in May 2014, has embarked on an active neighbourhood policy in South Asia, seeking to revive ties that were long clouded by India's sympathy with Sri Lanka's Tamil community during the civil war.

Modi addressed fears that India's $2 trillion economy could dominate that of Sri Lanka, with a gross domestic product of just $75 billion, by saying that he would like bilateral trade to grow and become more balanced.

"We both want deeper economic engagement," Modi said. He added that Indian businesses were keen to invest in Sri Lanka's infrastructure, energy and transport sectors.

Wickremesinghe said he hoped a framework economic cooperation agreement could be agreed in principle by the end of this year and to have final agreements "in place" by mid-2016.

Bilateral trade touched $3.64 billion in 2013, the last year for which figures were available from the government. Of that, India's exports to the island were $3.09 billion while it imported $543 million worth of goods from Sri Lanka.