Since the economic crisis began, India has emerged as a top lender for the island nation, providing millions in aid and sending across fuel and food. Meanwhile, China, which has been accused of engaging in “debt trap diplomacy”, has refused to provide Sri Lanka with any relief on interest payments
As Sri Lanka elected former prime minister Ranil Wickremesinghe as their new president, India promised to remain supportive and help the neighbouring nation in its economic recovery.
“As a close friend and neighbour of Sri Lanka and a fellow democracy, we will continue to be supportive of the quest of the people of Sri Lanka for stability and economic recovery, through democratic means and values, established democratic institutions and constitutional framework,” the Indian High Commission in Sri Lanka said in a statement.
Prime Minister Narendra Modi, who had said, “Neighbourhood first” is keeping good on his promise as Sri Lanka faces its worst-ever economic crisis. India has gone above and beyond its call of duty to help the beleaguered nation, as it struggles with a shortage of food, fuel, and medicines. And this might help New Delhi to regain the confidence of the Lankans and get an upper hand over China in the region.
We take a look at how India has come to Sri Lanka’s rescue during its direst times and what this means for geopolitics in Asia.
India’s helping hand
When Sri Lanka was struggling to find a way out of the economic crisis, it turned to New Delhi for help and the Narendra Modi-led government responded with financial aid and more.
India has provided around $5 billion worth of assistance to Sri Lanka of which $3.8 billion has been provided in 2022. In May, the island nation received its first consignment of a $16 million humanitarian aid package from India and in June, it sent more supplies with 14,700 metric tonnes (MT) of rice, 250 MT of milk powder, and 38 MT of medicines.
Sri Lanka is facing a severe shortage of fuel and India has been providing fuel. In February 2022, the two countries signed an agreement for a $500 million supply of petroleum products from the Indian Oil Company through a credit line. This was expanded by a further $200 million in April, reports news agency ANI.
Two more ships of diesel and petrol to the neighbours were sent in July. Lanka has received more than 400,000 tonnes of fuel from India over the past three months, according to a report in The Economic Times.
Kerala’s Trivandrum and Kochi airports are making provisions for more than 120 Sri Lanka-bound aircraft for technical landing so that they can refuel.
“The airports have gone beyond their call of duty by allowing technical landing to 120+ aircraft bound for Sri Lanka. The gesture will go a long way in furthering ties with our neighbour,” Union Civil Aviation Minister Jyotiraditya Scindia tweeted last week.
That’s not all. Many Sri Lankans, especially from the Tamil-dominated areas, have sought refuge in Tamil Nadu amid the crisis and their numbers are expected to increase.
Winning Sri Lankan hearts
India has committed to providing further financial aid to the country.
“The idea is to respond to Sri Lanka’s requests for enabling them to meet their foreign exchange crisis. We would like to continue to bring more investment into Sri Lanka because that will help create medium- and long-term capacity to respond within the Sri Lankan economy,” news agency Reuters reported Gopal Baglay, India’s high commissioner in Sri Lanka, as saying.
According to ANI, the country’s finance ministry said that in the four months through April, India has emerged as a top lender for the island nation.
“India has played a very crucial role, especially at this critical juncture. We have gone through an immense crisis as a country, and India has come forward and supported us,” Sajith Premadasa, Sri Lanka’s main opposition leader, told the BBC.
How Lanka became closer to China
India and Sri Lanka have close cultural and economic ties that go back decades. The Tamils in Lanka have a lot in common with the people from Tamil Nadu – the cultures, religions, and practices are similar.
However, after Mahinda Rajapaksa was elected president in 2005, Lanka started becoming close to China and depended on them for a huge infrastructure push. In 2011, the Hambantota port was inaugurated and China funded highways, ports, and airports across the country.
Beijing is Sri Lanka’s biggest creditor and makes up 10 per cent of its foreign debt. Between 2000 and 2020, it extended close to $12 billion in loans to the Sri Lankan government, mostly for infrastructure projects, which the island nation could not pay off.
Sumit Ganguly, a South Asia expert and professor of political science at Indiana University Bloomington in the US, told Deutsche Welle, “The shiny infrastructural projects that were built on the basis of Chinese loans have proven to be castles of sand.”
In 2020, Sri Lanka received another $3 billion from China, walking into what experts have called Beijing’s “debt trap” diplomacy. “Instead of making use of the limited reserves we had and restructuring the debt in advance, we continued to make debt payments until we ran out of all of our reserves,” said Ali Sabry, Sri Lanka’s caretaker finance minister from April to May, to the Wall Street Journal.
Then Sri Lankan President Gotabaya Rajapaksa and Chinese Foreign Minister Wang Yi at a sailing event on the occasion of the 65th anniversary of diplomatic relations between Sri Lanka and China at the Colombo Port city project in January 2022. Beijing is Sri Lanka’s biggest creditor and makes up 10 per cent of its foreign debt. AFP
Is China a friend or a foe?
China has refused Sri Lanka’s appeal to reschedule its huge debt burden.
Then Sri Lankan President Gotabaya Rajapaksa sought Beijing’s help in December 2021 as he requested a debt restructuring in a meeting with China Foreign Minister Wang Yi. However, Beijing refused to budge.
Beijing has provided some 500 million yuan ($75 million, EUR73.35 million) in humanitarian aid and has promised to “play a positive role” in Lanka’s talks with the International Monetary Fund. But it has turned a deaf ear to the struggling country’s appeal for debt relief.
People queue outside a state-run supermarket to buy essential food items in Colombo. India has provided food aid to the country during the crisis began. AFP
Advantage India
By stepping up in times of crisis, India has wrested some influence from China over Sri Lanka.
In January, after India provided initial credit, the two countries announced that they will jointly operate 61 giant oil tanks built during World War II in Trincomalee. India has been trying to access the British-era facility for three decades, says a BBC report.
In March, New Delhi inked a deal to set up hybrid power projects on islands in northern Sri Lanka, after China said in December that it was suspending its plans to build plants on three islands due to security issues. In the same month, Colombo also scrapped an agreement with a Chinese firm to build a $12 million wind farm in the country, and instead offered the project to an Indian rival, reports Deutsche Welle.
“India’s policy toward Sri Lanka is not based on a reaction to China. It is historical and based on people-to-people contacts with a shared culture. If you look at Indian investments in Sri Lanka, they are people-centric,” Smruti Pattanaik, a foreign policy research fellow at the Institute for Defense Studies and Analyses (IDSA) in New Delhi told the media house.
India indeed has taken significant steps to mend bridges with Sri Lanka. It’s a win-win as New Delhi regains an old friend and keeps China on its toes.
With inputs from agencies
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