Sri-Lankan crisis and opportunities for India

Contact Counsellor

Sri-Lankan crisis and opportunities for India

  • Election of President of Sri Lanka gives India an opportunity to take lead in foreign aid game in its neighbourhood.

Crisis in Sri Lanka

  • Amid debt default and shortage of dollars, Sri Lankan economy is experiencing stagflation.
  • Inflation is over 50%, translating into higher food and fuel prices.
  • Sri Lanka’s worst economic crisis since is due to
  • Slow recovery from COVID-19 pandemic
  • Russia-Ukraine conflict
  • Economic mismanagement under previous administration

Opportunity for India

  • In line with India’s neighbourhood-first’ policy.
  • Deepen its trade and investment linkages
  • Strengthen bilateral and regional partnerships
  • China’s debt driven development projects serve India with an opportunity to upscale its aid
  • Be a big brother in the region by working closely with the US, Japan, EU and IMF

Steps to take

  • Government must conclude talks with IMF and build national concensus
  • IMF will increase taxes and utility prices to control inflation while preserving social welfare expenditures to protect the poor.
  • Implement structural reforms to open economy to trade and investment.
  • Restore the rule of law and enforce strong anti-corruption policies
  • Reset foreign policy towards a more neutral direction and away from the pro-China stance.


  • With political will and the right set of policies, Sri Lanka stands a sporting chance of achieving some economic normalcy within the next three years.
  • India stands to gain by supporting Sri Lanka in its hour of need.