Sri Lanka’s economic crisis poses challenges for India4 min read . Updated: 09 Sep 2021, 10:30 PM IST
Our Neighbourhood First policy had led to increased economic cooperation with Sri Lanka but its economy is in deep trouble and India’s relations with it have taken a turn for the worse this year
India’s ‘Neighbourhood First’ policy towards Sri Lanka had resonated with Sri Lanka’s ‘India First’ foreign and security policy in 2020. India is Sri Lanka’s third largest export destination, after the US and UK. More than 60% of Sri Lanka’s exports enjoy the benefits of the India-Sri Lanka Free Trade Agreement, which came into effect in March 2000. India is also a major investor in Sri Lanka. India’s development partnership with Colombo has always been demand-driven, with projects covering social infrastructure like education, health, housing, access to clean water and sanitation, besides industrial development. Concessional financing of about $ 2 billion has been provided to Sri Lanka through various Indian government-supported Lines of Credit across sectors (for railway connectivity, infrastructure, supply of defence equipment, security, and counter-terrorism and solar projects, among others). Foreign direct investment (FDI) from India amounted to around $ 1.7 billion over the years from 2005 to 2019 and went into retail petroleum, hotels and tourism, real estate and manufacturing, apart from telecom, banking and financial services.