Foreign Policy Watch: India-Sri Lanka

In Sri Lankan crisis, a window of economic opportunity


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- India-Sri Lanka relations and challenges


The commonality between Sri Lanka and the southern parts of India remains a less-emphasised yet significant aspect of India-Sri Lanka relations.

Crisis in Sri Lanka and relief provided by India

  • The present economic crisis in Sri Lanka has pushed it closer to India for immediate relief.
  • India, as part of its ‘Neighbourhood First’ policy, has extended support to the people of Sri Lanka in the form of aid (close to $3.5 billion) to help secure Sri Lanka’s food, health and energy security by supplying it essential items such as food, medicines, fuel and kerosene.
  • The latest in the series was the signing of an agreement on June 10 between the Government of Sri Lanka and the Export-Import Bank of India for a $55-million short term Line of Credit to facilitate the procurement of urea for paddy crop in the ongoing ‘Yala’ season.
  • On its part, Tamil Nadu decided to provide aid of ₹123 crore, comprising 40,000 tonnes of rice, 137 types of life-saving drugs and 500 tonnes of milk powder.

Sri Lanka-India sub-regional context

  • During his second term as Prime Minister, Mr. Wickremesinghe while delivering a lecture in Chennai, in August 2003, called for the development of the south India-Sri Lanka sub-region as a single market.
  • Such a market would provide more opportunities for the economic growth of both countries.
  • In 2016 he highlighted the fact that the five Indian southern States, with a total population of 250 million, had a combined gross state domestic product of nearly $450 billion; with the addition of Sri Lanka’s $80 billion GDP, the sub-region would have a $500 billion economy, having an aggregate population of around 270 million.


  • Possibility of greater economic collaboration: Whether this bonhomie can lead to greater economic collaboration between Sri Lanka and south India, not necessarily Tamil Nadu alone, given the historical baggage, is anybody’s guess.
  • Baggage of history: Some sections of the Sinhalese still hold the view that India had been a threat to Sri Lanka and it can still be a threat to them.
  • The manner in which the Rajapaksa regime unilaterally scrapped in February 2021 a tripartite agreement signed in 2019 with India and Japan for the development of Colombo’s East Container Terminal was a reflection of the historical baggage.
  • This perception can be traced to history when Sri Lanka was invaded by rulers of south India who humbled the Sinhala kings.
  • In the aftermath of the 1983 anti-Tamil pogrom, the support provided by the Indian government to Tamil rebels only strengthened this perception.
  • Modest investment in Sri Lanka’s development: Despite India’s open willingness to take part in the development of Sri Lanka after the civil war, the scale of its involvement has been modest.
  • Incomplete projects due to lack of political will: After the cancellation of the tripartite agreement, India was later provided with projects such as the West Container Terminal, the Trincomalee oil tank farm and a couple of renewable projects, there were several proposals that envisaged India’s participation but did not see the light of day.
  • Another project, a collaboration between NTPC Limited and the Ceylon Electricity Board, was cancelled.
  • Other projects too such as the development of the Kankesanthurai harbour and the expansion of the Palaly airport in Jaffna, both envisaging Indian participation, would have become a reality had there been show of political will from the other side.
  • The project of building a sea bridge and tunnel, connecting Rameshwaram to Talaimannar, remains on paper.

Way forward

  • Infrastructure development: Even now, there is enormous scope for collaboration between the two countries in the area of infrastructure development.
  • Cross-border energy trade: The economic crisis has revived talk of linking Sri Lanka’s electricity grid with that of India.
  • If this project takes off, the first point of interconnectivity on the Indian side will most likely be in Tamil Nadu.
  • India has cross-border energy trade with Bangladesh, Nepal, Bhutan and Myanmar.
  • Facilitating people-to-people interaction: The apprehension in the minds of sections of the Sinhalese majority about India being a threat can be dispelled only by facilitating greater people-to-people interaction, including pilgrimages by monks and other sections of Sri Lankan society to places of Buddhist importance not only in north India but also in the south (Andhra Pradesh).


Much more will have to be done but the opportunity created by the current circumstances should be utilised to bring Indian and Sri Lankan societies closer — a prerequisite to achieving an economic union between Sri Lanka and the southern States of India.

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