Sri Lankan economy, which experienced a sharp decline following the outbreak of COVID in 2020, is showing no sign of improvement even if the global pandemic seems to be under control. The ongoing political crisis, an offshoot of the economic crisis in the country, has further impacted the economy. The political chaos in the country has shifted the attention of the policymakers from the real issue of finding an effective solution to deal with economic and financial challenges. Also, the ongoing public protest on the street with occasional incidents of violence has disrupted the economic activities in Sri Lanka. The island was declared bankrupt by the then Prime Minister of Sri Lanka Ranil Wickremesinghe in the first week of July this year.

India has emerged as the largest assistance provider to Sri Lanka to deal with the economic crisis. In the last six months, India has provided assistance worth US$3.8 billion. The bilateral assistance has been a great help to Sri Lankan people to navigate through the crisis period; however, the Indian assistance alone cannot rescue Sri Lanka as the financial requirement to import the essential items and to repay the loans in future is huge. Beyond a point, India would find it difficult to provide economic assistance because of its own limitations.

India has played a crucial role in the multilateral fora including the 2022 Spring meetings of the IMF-World Bank, and QUAD summit 2022 in sensitising the international community to come forward to assist Sri Lanka to meet the ongoing challenges. In addition to the immediate relief package, India is also committed to support Sri Lanka to revive its economy by collaborating in the field of tourism, energy and agricultural sector.

While there is a general consensus that India must assist Sri Lanka at the time of crisis, questions are also posed within the country particularly in social media that why India needs to assist Sri Lanka for the problem of its own making. This commentary highlights the following reasons to address the question :

  a) The fallout of the ongoing economic crisis is not limited to Sri Lanka only. Due to the geographic proximity and the people-to-people connection as well as business and economic linkages between India and Sri Lanka, the impact of the crisis will have a spillover effect on India. There are reports of Sri Lankan Navy foiling attempts of illegally migration out of the country almost on a daily basis. Reportedly, a few Sri Lankan Tamils have already migrated to India and staying in India as illegal refugees. Though at present their numbers are not alarming, if the crisis continues for long there may be a situation of the influx of illegal immigrants from Sri Lanka causing an additional burden on the Indian economy. Also, a large number of Indian businessmen and investors are doing engaged in Sri Lanka. The ongoing economic and political crisis has affected the businesses of these Indians too. Therefore, it is in the interest of India too that the country comes out of the crisis soon.

  b) The poor economic conditions, joblessness, and non-availability of essential items are likely to increase crimes not only in Sri Lankan territory but also across and along the line of international maritime boundary between India and Sri Lanka in the form of smuggling of drugs, and contrabands. The economic crisis is also likely to increase the vulnerability of the island nation to emerge as a fertile ground for recruitment by the terror and criminal groups affecting the security situation in the entire region, the maximum brunt of which might have to be faced by India.

  c) In terms of geopolitical competition between India and China in Sri Lanka, the former has until lately succeeded to manage the public perception of the island in its favour. China has been generally perceived by the Sri Lankans as a benign economic partner that does not interfere in the internal affairs of the country. China was also considered a resourceful willing partner that contributes positively to the Sri Lankan economy with its efficiency and timely delivery. Chinese approach and attitude towards Sri Lanka amid this economic crisis have now, however, changed that perception significantly. Failure on the part of China to positively respond to the Sri Lankan government’s request for financial assistance and restructuring of the debt has exposed China’s true intent for Sri Lanka.

India through its proactive and timely assistance must reiterate that it has both the capability and political will to come to the rescue of friendly neighbours who are in crisis. One positive development as far as Indian assistance is concerned is the contribution from the people and government of Tamil Nadu not only for the Tamil areas but for the entire country. This shows that India is not biased toward a particular community; instead it wants stability in the entire country. India’s proactive role during the crisis is going to reduce the anti-India sentiment significantly. However, there is a caveat though. Despite the generous assistance, a section in Sri Lanka may likely to continue its anti-India propaganda; but that should not discourage India to continue its assistance to crisis-ridden Sri Lanka.

India has to think of out-of-the-box possibilities to assist Sri Lanka beyond the current financial package. New Delhi must be mindful of the fact that there are sensitivities involved in the bilateral relations and these should be respected while executing the options available to India so that assistance is not perceived as an imposition of a big brother’s will. India should also be wary of the fact that developments in Sri Lanka may not directly impact the extra-regional countries as much as they impact India. Therefore, those countries may not come forth proactively while executing the multilateral collaboration to assist Sri Lanka. Since India’s stake is high, it must play a leadership role even in the execution of multilateral efforts to assist Sri Lanka.

Finally, though India must not interfere in the political affairs of the country, it must urge all the parties to come to an amicable solution to end the political chaos and uncertainty in the country as political stability is the prerequisite of finding and executing the effective solutions to overcome the economic crisis.

Dr. Gulbin Sultana is an Associate Fellow at the Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA). Views expressed are of the author and not of the Government of India or MP-IDSA.