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.
Conclusion
- 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.