Sri Lanka in Dire Straits: What It Means for India–Sri Lanka Relations

Shriya Mishra
17th May 2022

Picture Courtesy: Reuters

Sri Lanka has been hit by an economic crisis, worst in several decades. With both political and economic challenges in hand, the 22 million population of the island nation has been going through hard times, facing one of the toughest uphill battles in handling their day-to-day survival. There has been an emergency declared in the country by the President, Gotabaya Rajapaksa. The enormous anti-government protests by the demonstrators, including attacks on the Rajapaksa ancestral home, have forced Sri Lanka’s Prime Minister, Mahinda Rajapaksa, to resign and make way for a unity government. The economic crisis caused due to tourism related impact of Covid-19, Easter Sunday bombings in 2019, and the tax cuts have left the country with only $50 billion worth foreign reserves. Additionally, the country also has a major agricultural crisis going on, because of the government’s ban on fertilizers to shift to organic or biological farming. As the Sri Lankan foreign minister said, “The government has bitten off more than they can chew”.

Such crises shed light on the nature of one’s relations with other countries. Being the closest neighbor, one would undoubtedly assume India and Sri Lanka to have the closest ties. But it seems that India would need to build yet another bridge to solidify the relationship in the face of Colombo’s dire circumstances and the need to regain its economic footing. Sri Lanka has been a challenge for India’s policymakers despite the latter’s efforts towards “Neighborhood First Policy” and Colombo’s drift towards China’s orbit has been a major challenge for India’s foreign policy. Perceptions in of India’s interference in Sri Lanka’s internal affairs and India’s approach to the civil war in Sri Lanka has been one of the major reasons for rifts between the neighbors. There have also been issues in the International Maritime Border Line between India and Sri Lanka. Sri Lanka has been asking for the ban of mechanized trawlers used by the Indian fisherman which the Sri Lankan fishermen are deprived of although no conclusion has been reached. Another reason for Sri Lanka moving to the Chinese orbit of “debt diplomacy” pertain to the tangible economic benefits provided by Beijing.

China has now become a major trading partner of Sri Lanka’s. The total trade turnover between Sri Lanka and China was $4202 million in 2017. China has also been a major partner for Sri Lanka’s drive towards economic development and has committed financial assistance by ways of grants and loans for priority development projects in Sri Lanka. Instances like the Chinese Harbor Engineering Company clinching the contract to develop the controversial Eastern Container Terminal show that the Rajapaksa government has been taking the nation closer to Beijing. In 2019, India, Sri Lanka, and Japan had a signed a trilateral Memorandum of Cooperation regarding the development of the East Container Terminal at the Colombo Port, where 70% trans shipments are linked to India. In January 2021, the Sri Lankan government unilaterally pulled out of the agreement saying that there would be an “investment” in the ECT by the Indian Adani group. In November 2021, the Sri Lankan government finally handed over the project to the state-run Chinese firm.

Signing the India-Sri Lanka Free Trade Agreement to fill the asymmetries between the two countries shows how India sought to do more without any major reciprocity. The ISFTA was signed in 1998 and came into force in 2000.  In 2018, the India-Sri Lanka Free Trade Agreement amounted to trade worth $4.93 billion. The same year, exports from India to Sri Lanka amounted to $4.16 billion and $767 million from Sri Lanka to India. Between 2015-2021, the Indian Prime Minister and External Affairs Minister made six trips to Colombo, whereby they extended Line of Credit for railways construction, extended swap arrangement to stabilize the Sri Lankan currency, helped in infrastructure, started free ambulance services pan island, and built 1500 houses for Indian-origin-Tamils. On the contrary there have only been two incoming visits of the Sri Lankan Prime Minister to India whereby an agreement was signed on Orbit Frequency, MoU regarding Indian grant assistance for small development projects was renewed, and MoU for supply of medical equipment was signed. Joint defense exercises too, like MitraShakti, SLINEX, and the SAGAR Vision, have been an initiative of New Delhi. India even covered the cultural aspect through its various measures like offering scholarship slots, launching e-Tourist Visa Scheme, the Four Pillar Initiative and setting up Indian Cultural Centre in Colombo. Even during such times India, being hit by Covid-19 itself, went out of its way to help Sri Lanka. From extending assistance, credit facilities for fuel and food, extended currency swap, to sending tons of rice, nano-nitrogen liquid fertilizers and daily ration items, India has been of immense help to Sri Lanka.

Being on good terms with its immediate neighbor will always be fruitful for India and statements like “India pledged to support the people of Sri Lanka and will always be guided by the best interests of the people of Sri Lanka expressed through democratic processes” by Indian officials show that India is well aware of the prevailing circumstances. But in times like such, it is Sri Lanka who is more in need of this beneficiary friendship, which India pledges to provide. Nevertheless, India being the bigger country needs to fill the gaps between the two and comprehend if it is lacking in providing Sri Lanka what it actually needs.


*Shriya Mishra is a Post Graduate Student at the Amity Institute of International Studies (AIIS), Amity University, Noida 

Disclaimer: The Views in the Article are of the Author