India Sri Lanka relations: Explained, pointwise

Introduction

Recently, President Ranil Wickremesinghe of Sri Lanka visited India. This was his first foreign visit since assuming the office a year ago in the midst of civic chaos fueled by economic crisis. During the visit, the two nations announced an economic-partnership vision that underscores India’s commitment to ensure a prosperous Sri Lanka as key to regional stability. 

What is the highlight of the visit? 

The highlight of the visit was a joint statement on economic cooperation titled “Promoting Connectivity, Catalysing Prosperity: India-Sri Lanka Economic Partnership Vision” which lays out the vision in five areas: maritime connectivity, air connectivity, energy and power connectivity, trade, economic and financial connectivity and people-to-people connectivity. 

Maritime and air connectivity: new investments will be made in developing ports and airports in Sri Lanka, resuming ferry services. Flight networks to connect Tamil Nadu and Sri Lanka’s Northern and Eastern Provinces will be expanded too. 

Energy and power connectivity: A major surge in energy connectivity will include developing renewable energy, wind and solar plants in Sri Lanka.  

Trade connectivity: India and Sri Lanka will increase trade, and India will continue support for Sri Lanka’s economy. A memorandum of understanding was signed to operationalise UPI digital payments in Sri Lanka and to designate the Indian Rupee as currency for trade.  

People-to-people connectivity: The two countries also agreed to explore ways of enhancing tourism and cultural and religious travel, and educational collaboration. 

About India Sri Lanka relations 

Historical and cultural relations: India and Sri Lanka have a shared legacy of historical, cultural, religious, spiritual and linguistic ties that is more than 2,500 years old. Buddhism is one of the strongest pillars connecting the two nations and civilizations from the time of the Great Indian Emperor Ashoka. 

Commercial Relations: India and Sri Lanka enjoy a vibrant and growing economic and commercial partnership, which has witnessed considerable expansion over the years. The entry into force of the India-Sri Lanka Free Trade Agreement (ISFTA) in 2000 contributed significantly towards the expansion of trade between the two countries. India has traditionally been among Sri Lanka’s largest trade partners and Sri Lanka remains among the largest trade partners of India in the SAARC. India was Sri Lanka’s largest trading partner with an overall bilateral trade of USD 5.5 billion in 2022. 

India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka. According to the Central bank of Sri Lanka, the total FDI from India so far exceeds US$ 2.2 billion. In 2021, India was the largest source of FDI which amounted to US$ 142 million. 

Development Cooperation: Sri Lanka is one of India’s major development partners and this partnership has been an important pillar of bilateral ties between the two countries over the years. With grants alone amounting to around USD 570 million, the overall commitment by India is more than USD 3.5 billion. Demand-driven and people-centric nature of India’s development partnership with Sri Lanka have been the cornerstone of this relationship. Grant projects cut across sectors such as education, health, livelihood, housing, industrial development etc. 

Maritime Security: The SLINEX naval exercises have become one of the most visible manifestations of Indo-Sri Lanka cooperation in maritime security. Sri Lanka is a part of India’s regional maritime security architecture with Sri Lankan coastal surveillance radars being integrated to the International Fusion Center – Indian Ocean Region (IFC-IOR) at Gurugram in India. 

What is the strategic significance of Sri Lanka? 

Strategic location: Sri Lanka is strategically located in the Indian Ocean. The East-West maritime route passing around the island state carries around two-thirds of the world’s oil and half of the world’s container transportation. 

Maritime security: Also, Sri Lanka is home to ports that have the potential to become important maritime hubs in the Indian Ocean. The potential of Sri Lanka to ensure maritime security and trade and in securing the strategic Sea Lanes of Communication adds to its significance in the region. 

Maintenance of stability, peace and security: In recent years, there has been a noticeable rise in Chinese influence within the country, particularly evident through China’s Belt and Road Initiative. China has established terminals in both the Port of Colombo and the Port of Hambantota. Given the rivalry and problems between India and China and India’s desire to maintain stability, peace and security in the region, Sri Lanka becomes even more important. 

Is Sri Lankan economic crisis an opportunity for India? 

Last year, Sri Lanka went through its gravest economic crisis since gaining independence in 1948. In this severe crisis,  

India as a good neighbor, and following its ‘neighbourhood first’ policy, had extended financial assistance to the tune of USD 4 billion. Also, India strongly supported Sri Lanka’s debt restructuring plan at the International Monetary Fund.  

This has generated a lot of good will and radically improved India’s bargaining power with Sri Lanka. India’s efforts have also resulted in some tangible outcomes.  

For example, India signed a deal with Sri Lanka to develop Trincomalee oil tank farm. India has sought such a deal for decades. India’s National Thermal Power Corporation is also going to develop a 100-megawatt power plant in Sampur, a strategic point at the Trincomalee’s natural harbour. Also, Sri Lanka cancelled a Chinese company’s licence to build a micro electricity grid close to India. 

However, it would be unrealistic to assume that Indian assistance alone would automatically bring Sri Lanka under Indian influence.  

Nevertheless, India must continue to provide as much assistance to Sri Lanka as possible to deal with the present economic crisis, because prolonged instability in the country will have a spill-over effect on India too. 

What are the challenges in India Sri Lanka relations? 

Fishing disputes: Despite reaching an agreement 47 years ago through the 1974 Indo-Lanka Maritime Boundary Agreement, India and Sri Lanka have not yet resolved their maritime dispute. Indian fishermen continue to cross the maritime border into Sri Lanka in the Palk Strait, resulting in encounters with the Sri Lankan Navy, leading to tensions and assaults. 

Tamil issue: There is concern regarding Sri Lanka’s lack of measurable progress in fulfilling its commitment to finding a political solution to the Tamil issue. The Tamil community in Sri Lanka has been demanding the implementation of the 13th Amendment that provides for devolution of power to it. 

Chinese influence in Sri Lanka: China has used its geoeconomics to achieve its geopolitical objectives in Sri Lanka. This has resulted in strategic land acquisitions, which could easily transform into a civil-military operation. China also enjoys significant domestic political influence amongst the political parties in Sri Lanka. 

Conclusion 

India’s relationship with Sri Lanka is framed within India’s “Neighbourhood First” policy and “SAGAR” framework. The India-Sri Lanka relationship is multi-dimensional and deeply rooted in historical ties. Recently, a transactional economic aspect has been introduced to the relationship, which is expected to reduce Colombo’s reliance on Beijing. This development is also likely to positively influence India’s security considerations in the Indian Ocean region. 

Sources: Indian Express, The Hindu