Sri Lanka Economic Crisis and India-Sri Lanka Relationship

Sri Lanka Economic Crisis

India and Sri Lanka have a old ties in the field of development , education , culture and defence . Both countries share a legacy of intellectual , religious , linguistic and religious interaction. They have friendly relationship from more than 2500 years .

Sri Lanka Economic Crisis

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Recently Sri Lanka is facing an economic crisis in the whole country. India provided aid to Sri Lanka to ease the country’s worse condition.It was the country’s worst economic crisis since its independence in 1948. It causes high inflation in the country, the foreign exchange reserves ended, basic commodities’ prices touched the sky and medical supplies faced scarcity.The reasons for this Economic crisis as per India’s understanding are –  

  1. The pandemic is the major reason for the economic crisis in Sri Lanka. Travel restrictions crash the tourism industry of the country. Tourism is the main source of income in this island country and plays a major part in the Forex reserve. It affected the Forex exchange reserve and gave birth to the economic downturn.
  2. Sudden shift to organic farming created concern related to Food shortage . Organic farming imposed in whole country in one go produced less food production . Less production could not able to cover the population and increases Inflation .
  3. Lose in tea and Garment Industry crested huge unemployment in the population. Inflation and unemployment is the sufficient reason to begin a economic crisis. These two factors should have became the focus area of the finance minister and government of the Sri Lanka but they did not give focus on it .  
  4. Debt trap of China also indulged Sri Lanka into its greedy Chinese debt trap policy . Huge interest of Loan repayment put Sri Lanka into a worst scenario in its entire nation History . They also gave their strategical important Hambantota Port which is in Eastern side of the Island to China on lease for 99 years . China became the Largest Bilateral creditor to Sri Lanka.
  5. Corruption of the ruling Rajapaksha family caused internal reasons of economic Crisis of Srilanka . They are bad Policy makers and increased money Supply in market through printing of money which created chaos in the country .  

India Sri Lanka Relations

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  • Social and Political Relation:- Srilanka has been divided into 9 provinces and the Population has been divided into two groups- Tamil and Sinhala Population. Tamil Population is in the minority and Sinhalas is in the majority from the beginning. Tamil Minority includes both Hindus and Muslims. These two minority and majority communities indulged in civil war for nearly 3 decades. India aided internally displaced people and underprivileged groups of the population and strengthened the two nations’ friendship. India also sent peace keeping forces to resolve the civil war but commanded them back and took a non-interference policy. That Civil War ended in May 2009 after nearly 3 decades-long armed War. During the Civil War, Sri Lanka also violated the Human Rights of  Citizens, but India did not talk against Sri Lanka following its Non-Interference Policy.
  • Economic and Trade Relations:-The Geographical location of Sri Lanka is very important concerning trade and commerce with India . It is the main shipping lane connecting Europe with East Asia. India is Sri Lanka’s third largest export destination, after US and UK. India is also a major investor in Sri Lanka. Both of the countries also enjoy free Trade agreements.India and Sri Lanka are also members of BIMSTEC which is a multi-sector Technical and Economic Cooperation. As a case of concern, China is the largest investor in Sri Lanka which invests around 23.6% of the FDI, on the other side India Invests on an average of around 10.4% of the FDI.
  • India’s concerns:- During the civil War, India had given favor to the 13th Amendment to resolve the civil war. It suggested creating a provincial council by all sections in every 9 provinces of the country. It could also devolve center power to provincial councils that might promote decentralization of power. In the present scenario, the Fisherman issue is the cause of concern between India and Sri Lanka. India also wants to maintain its dominance in the Indian Ocean region through its mutual agreement with Sri Lanka called SAGAR (Security and growth for all in the region). An another concern is the presence of China in Sri Lankan ports because India’s 60% of transshipment Passes through Colombo Port which is a very important location for Indian trade and commerce.

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