Sri Lanka-India Relations

Renewed Bonds.

President Anura Kumara Dissanayake’s state visit to India in December 2024 marked a turning point in the diplomatic history of Sri Lanka-India relations. As his first overseas visit since assuming office, this trip highlighted the significance of the bond between the two neighbours. India welcomed Dissanayake with ceremonial grandeur, signalling its intent to deepen ties with Sri Lanka. This visit comes at a crucial time for Sri Lanka, a nation recovering from a severe economic crisis and looking for stable partnerships to ensure sustainable growth.

The visit resulted in several key agreements aimed at boosting trade, energy cooperation, and technological exchanges. It also reaffirmed the shared vision of the two nations for a peaceful and prosperous South Asia. Beyond the specifics of the agreements, the visit is emblematic of Sri Lanka’s broader diplomatic strategy to balance its relations with India and China while focusing on its domestic development.

Recalibrating Bilateral Relations

The choice of India as President Dissanayake’s first foreign destination was not incidental. Historically, India and Sri Lanka share deep cultural, economic, and political ties. However, recent decades saw fluctuations in this relationship, particularly with the increasing influence of China in Sri Lanka. This visit served to recalibrate the relationship, signalling Colombo’s intent to strengthen its partnership with New Delhi.

The agreements signed during this visit were not merely symbolic but demonstrated a strategic shift in focus. India pledged to supply liquefied natural gas (LNG) to Sri Lanka, facilitate trade in local currencies, and encourage Indian businesses to invest in Sri Lanka. These initiatives aim to address Sri Lanka’s pressing economic challenges while creating a foundation for long-term collaboration.

This shift also reflects India’s evolving perception of Sri Lanka—not merely as a neighbour with security implications but as a partner with the potential to drive regional growth.

Economic Cooperation: From Aid to Trade

At the heart of the visit was a strong emphasis on economic cooperation. Sri Lanka, once South Asia’s highest GDP per capita economy, faced a sharp economic downturn after its 2022 debt default. While Indian aid during the crisis was pivotal, the focus has now shifted to trade-led growth.

One of the most significant outcomes of the visit was the agreement to promote trade settlements in local currencies—Indian Rupees (INR) and Sri Lankan Rupees (LKR). This measure is expected to reduce Sri Lanka’s dependence on foreign exchange reserves, a critical issue given its economic vulnerabilities. Additionally, India’s promise to help digitise Sri Lanka’s public services reflects an understanding of the need for structural reforms in governance.

Infrastructure development also featured prominently in the discussions. Renovating railway systems and developing ports, with Indian assistance, will enhance connectivity and trade. These projects are expected to boost tourism and facilitate smoother business operations, contributing to Sri Lanka’s economic revival.

Strategic Reassurances and Security Collaboration

Security concerns remain a critical aspect of India-Sri Lanka relations. During the visit, President Dissanayake reaffirmed Sri Lanka’s commitment to respecting India’s security concerns. This assurance holds significant weight, given the strategic importance of the Indian Ocean region and the growing presence of China through projects like the Hambantota Port.

Sri Lanka’s promise not to allow its territory to be used against India underscores its intent to maintain a balanced foreign policy. At the same time, both nations have agreed to collaborate on maritime security, counter-terrorism, and cyber security. These measures not only enhance trust but also ensure a stable regional security environment.

The Geopolitical Context

Dissanayake’s visit occurred against the backdrop of shifting regional dynamics in South Asia. India’s relations with several neighbours, including Bangladesh and Nepal, are under strain, while China continues to expand its Belt and Road Initiative (BRI) across the region. For Sri Lanka, navigating this geopolitical landscape requires careful diplomacy.

While India remains a key partner, Sri Lanka cannot afford to sideline China, which has been instrumental in its infrastructure development. Chinese media’s response to the visit, while critical of India’s portrayal, suggested that China continues to view Sri Lanka as a strategic ally. As Sri Lanka plans a subsequent visit to China, it must strike a delicate balance between these two major powers.

A Domestic Boost for Sri Lanka

Domestically, the visit has bolstered Dissanayake’s image as a pragmatic leader. His administration, elected on a platform of anti-corruption and inclusive development, has already taken steps to modernise governance and address economic challenges. The agreements signed with India align with these efforts, providing tangible benefits such as improved public services and enhanced infrastructure.

The continuation of the IMF programme, supported by India, reflects the government’s commitment to fiscal discipline while ensuring social spending. This balance is critical for addressing issues like poverty and unemployment, which remain pressing concerns for the island nation.

Challenges and Opportunities for Sri Lanka-India Relations

While the visit marks a promising start, challenges remain in realising its full potential. The stalled India-Sri Lanka Free Trade Agreement (FTA) negotiations, for instance, need to be revived. A comprehensive trade deal covering goods, services, and investment could significantly boost bilateral trade. However, such negotiations require careful handling to address domestic concerns in Sri Lanka about opening up its markets.

Infrastructure projects like the undersea oil pipeline and electricity transmission line, agreed upon in 2023, also face delays. Their completion is essential for enhancing energy security and economic integration. Both governments must ensure effective coordination and timely implementation to overcome these hurdles.

Besides, while India has taken steps to deepen ties with Sri Lanka, it must address its strained relationships with other neighbours to foster a cohesive regional strategy. For Sri Lanka, maintaining its balancing act between India and China will be crucial to preserving its strategic autonomy.

The Broader Regional Impact

The enhanced cooperation between India and Sri Lanka has implications beyond the bilateral relationship. It sets an example for regional collaboration in South Asia, a region often characterised by fragmented ties and missed opportunities for economic integration. Drawing parallels with Southeast Asia’s Greater Mekong sub-region, the India-Sri Lanka partnership could serve as a model for fostering connectivity and shared growth.

This partnership also aligns with India’s Neighbourhood First policy, which aims to strengthen ties with its immediate neighbours. By supporting Sri Lanka’s recovery and growth, India not only enhances its own strategic position but also contributes to regional stability.

The Chinese Perspective

Chinese media’s coverage of the visit highlighted the geopolitical undercurrents. Outlets like the Global Times critiqued Indian media narratives that framed the visit as a strategic shift away from China. Instead, they emphasised the ongoing strength of China-Sri Lanka relations and dismissed the notion that the visit would impact their bilateral ties.

China remains a significant player in Sri Lanka’s economic landscape, with major investments like the Hambantota Port and Colombo Port City. Moving forward, Sri Lanka must navigate its relationships with India and China carefully, ensuring that it maximises benefits from both without compromising its strategic interests.

Conclusion about Sri Lanka-India Relations

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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH