The first words from President Anura Kumara Dissanayake after his electoral victory were of a “new renaissance”. Global media branded it as a victory for a Left-leaning Government, with Indian media predicting friction in India-Sri Lanka relations.
Contrary to this narrative, India’s Ambassador to Sri Lanka was the first to greet the President-elect and Prime Minister Narendra Modi quickly followed suit. This underscores that ‘indecision as wisdom’ and ‘timidity as strategy’ are no longer the cornerstones of India’s foreign policy. The recently released ‘Asia Power Index 2024’ by the Lowy Institute places India as the third most powerful country in Asia, trailing only the US and China.
In recent times, India’s diplomatic achievements, from hosting the G20 to making significant advancements in mediating between Russia and Ukraine to garnering the support of four permanent members of the United Nations Security Council (UNSC) for permanent membership, have been showcasing a balanced yet disruptive engagement strategy.
This has involved engaging the US, managing China, cultivating Europe, reassuring Russia, and extending a helping hand to Africa while navigating a landscape marred by two major conflicts and the lingering effects of the Covid-19 pandemic.
As the world’s most populous nation, India’s internal matters hold global implications, making regional stability and the welfare of neighbours paramount. Thus, the relationship between India and Sri Lanka stands as a critical barometer for stability in South Asia, especially in a world increasingly shaped by geopolitical uncertainties and economic upheavals.
The current status of India-SL relations
In recent years, the bilateral relationship between India and Sri Lanka has notably strengthened. “India will always stand by Sri Lanka in its time of need, as a reliable neighbour and partner,” said Modi in 2022, following over $ 3.8 billion in financial aid to Sri Lanka. This support encompassed credit lines for essential goods, fuel, and food, reflecting India’s commitment to regional stability.
President Dissanayake recently affirmed his commitment to prioritising India in his country’s foreign policy, especially regarding India’s ‘Neighbourhood First’ policy and the Security and Growth for All in the Region (Vision SAGAR) initiative. His predecessor, Ranil Wickremesinghe, had also emphasised the potential for deeper economic cooperation, particularly in the energy, infrastructure, and technology sectors.
Historical fallouts in India-SL relations
The India-Sri Lanka relationship carries historical baggage; notably, the scars from the ongoing fishermen issues to the Indian Peace Keeping Force (IPKF) intervention in the late 1980s and Sri Lanka’s role during the 1971 India-Pakistan war, fostering mistrust. However, Prime Minister Modi emphasised the need to learn from the past while focusing on future cooperation, which is vital for smoother relations.
Common challenges faced by both nations
Both nations grapple with issues affecting their populations. Rural poverty, inflation, and unemployment are pressing concerns for India and Sri Lanka.
While India has made significant strides in urban sectors, it continues to face deep-rooted poverty in rural areas. Similarly, Sri Lanka, particularly in regions affected by its civil war, struggles to provide economic opportunities.
Common challenges include inflation, climate change, and the rising cost of living, worsened by global supply chain disruptions. The 2022 crisis in Sri Lanka highlighted these issues, resulting in food shortages and inflation that disrupted daily life.
Additionally, rising sea levels pose a serious threat, impacting 33% of Sri Lanka’s population due to climate change. India’s rural development policies and the concept of Lifestyle for Environment (LiFE) could provide a framework for Sri Lanka in tackling these challenges.
India’s growth as an opportunity for SL
India’s rise as an economic powerhouse offers valuable lessons for Sri Lanka. The Indian startup ecosystem and the digital economy are integral to this transformation. Prime Minister Modi’s vision for ‘Atmanirbhar Bharat’ (self-reliant India) has driven significant investments in the manufacturing sector, supported by initiatives like the Production-Linked Incentive (PLI) scheme.
With a projected growth rate of 6.3% this year, India’s economic resilience is evident. Its investments in digital infrastructure and financial inclusion, exemplified by the Unified Payments Interface (UPI), are pivotal to this growth.
These innovations could serve as a blueprint for Sri Lanka as it aims to rebuild a sustainable, inclusive economy. The Sri Lankan Government has expressed its eagerness to learn from India’s digital transformation, especially in fintech and startups.
India’s investments in SL’s stability
India’s role in stabilising Sri Lanka extends beyond immediate financial aid. Long-term investments in infrastructure, energy, and technology bolster Sri Lanka’s recovery efforts. One significant collaboration is the modernisation of the Trincomalee Oil Tank Farm, a $ 700 million project that enhances Sri Lanka’s energy security.
Furthermore, India’s investments in renewable energy, including solar and wind projects, highlight its commitment to supporting Sri Lanka’s energy independence. These initiatives align with both countries’ commitment to global climate action and demonstrate how economic cooperation can yield broad benefits.
Entrepreneurship: The bridge to stronger economic relations
Entrepreneurship offers a distinctive avenue to address Sri Lanka’s economic challenges while strengthening India-Sri Lanka relations.
India’s Micro, Small, and Medium-sized Enterprise (MSME) sector contributes approximately 30% to its Gross Domestic Product (GDP) and plays a vital role in job creation. By fostering cross-border collaborations between Indian and Sri Lankan Small and Medium-sized Enterprises (SMEs), both nations can drive innovation and create sustainable employment, particularly in rural areas.
India can support Sri Lanka in developing its entrepreneurial ecosystem by providing technical expertise, financing access, and skill development programmes, as well as enhancing Business-to-Business (B2B) partnerships. Joint business incubators, startup exchange initiatives, and collaborative projects in technology and manufacturing can facilitate deeper economic ties between the countries.
Maximising India’s potential
By 2047, India aims to become a $ 30 trillion economy, currently sitting at $ 3.9 trillion. This presents immense opportunities for neighbours like Sri Lanka.
In his book ‘The India Way,’ the country’s External Affairs Minister (EAM) Dr. S. Jaishankar notes: “Our growth model and political outlook intrinsically favour rules-based behaviour.” This philosophy is increasingly reflected in India’s foreign policy.
Despite historical challenges, there is significant potential for both nations to carve out a path of economic cooperation that benefits their populations. As India’s EAM prepares for his visit to Sri Lanka, the opportunity is ripe for strengthening ties through business offers.
(The writer is the CEO of Governance Consulting Group [GCG]. He can be found on X: @ankitrajbharat)