Introduction
Despite leading the traditionally pro-Chinese Janatha Vimukthi Peramuna (JVP) party, Sri Lankan President Anura Kumara Dissanayake chose India for his first overseas visit since taking office, reaffirming India’s strong commitment to its “Neighbourhood First” policy. During his meeting with Indian Prime Minister Narendra Modi, Dissanayake assured that Sri Lankan territory would not be used in ways inimical to India’s security. This is a significant statement given past concerns over Chinese naval activity in the region. The joint statement emphasized continuity in bilateral ties, focusing on economic, agricultural, and digital cooperation. It also highlighted progress on the proposed Economic and Technological Cooperation Agreement and addressed ongoing challenges, such as the fisheries dispute, while omitting contentious issues like the 13th Amendment. Dissanayake’s visit signifies a balancing act between India and China, reflecting his commitment to maintaining partnerships with both. His approach mirrors his predecessor, Ranil Wickremesinghe, who stimulated economic ties with China while supporting Indian investments.
Sri Lanka’s economic crisis, which began in 2019, marked one of the most challenging periods in the island nation’s history. As it struggled with a combination of economic mismanagement, external shocks, and fiscal shortfalls, Sri Lanka faced an unprecedented economic meltdown. In the middle of the crisis, the controversy began when Sri Lanka procured pesticides from China in a bid to support its farming sector. However, these pesticides carried an unintended consequence, a pest that proved incompatible with Sri Lankan soil. Rather than enhancing crop yields, the pesticides contributed to soil degradation and crop failure, leaving farmers grappling with reduced productivity and increased costs. Despite being aware of the detrimental effects of the product, the Chinese supplier refused to accept returns or provide compensation. Instead, China insisted on full payment for the faulty pesticides, placing Sri Lanka in a difficult position. For a country already navigating an economic crisis, this demand added to its fiscal burdens, further straining its limited resources.During this tumultuous time, India emerged as a steadfast partner, extending critical support to its neighbour, and helping it navigate the worst of its financial woes. One of the most significant ways India supported Sri Lanka was through a $4 billion line of credit extended in 2022. This credit facility enabled Sri Lanka to import essential goods, including food, medicines, and fuel, at a time when its foreign exchange reserves were nearly depleted. This timely intervention not only alleviated immediate shortages but also helped stabilise public sentiment during widespread protests and social unrest.
What is India’s “Neighbourhood First Policy”?
India’s strategic location in South Asia, bordered by countries such as Pakistan, China, Nepal, Bhutan, Bangladesh, Myanmar, and Sri Lanka, creates a foundation for a complex and dynamic network of relationships with its neighbours. This geographical positioning shapes India’s diplomatic, economic, and security engagements in the region. India’s “Neighbourhood First Policy” (NFP), also referred to as the South Asian Foreign Policy (SAFP), centers on strengthening ties with neighbouring South Asian countries. This strategy focuses on enhancing peace and cooperation in the region, emphasizing trade, connectivity, and people-to-people exchanges with countries on India’s periphery. The Ministry of External Affairs (Economic Diplomacy Division) brief states, “India’s Neighbourhood First Policy rests on India’s prime responsibility to lift its neighbours to establish a rules-based order to preserve multilateralism and to establish peace and security in the Indian Ocean.”
India and Sri Lanka’s Evolving Partnership
India’s NFP and Sri Lanka’s “India First” approach have faced various complex challenges that have shaped their current relationship. After nearly 30 years of internal conflict in Sri Lanka, the country shifted its focus to economic recovery and adopted a more Asia-focused foreign policy. These changes led to a recalibration of India-Sri Lanka bilateral relations, highlighting their evolving partnership in the region. Sri Lanka holds significant importance for India due to several key factors. Strategically, its location in the Indian Ocean makes it vital to India’s security interests, serving as a hub for the movement of naval fleets between the Bay of Bengal and the Arabian Sea. Economically, Sri Lanka is one of India’s key trading partners, with bilateral trade reaching approximately USD 3.6 billion in 2020, positioning India as Sri Lanka’s second-largest trading partner.Since the implementation of the Indo-Sri Lanka Free Trade Agreement (ISLFTA) in 2000, Sri Lankan exports to India have grown significantly, accounting for over 60% of the country’s total exports to India in recent years. Sri Lanka plays a crucial role in India’s Indian Ocean strategy, helping India build partnerships and advance its goal of forming an Indian Ocean Rim Community. The geopolitical dynamics in the Indian Ocean Region (IOR) have added another layer of complexity, turning it into a strategic arena where regional and global powers vie for influence. These dynamics have reshaped India-Sri Lanka relations based on each country’s strategic outlook towards the IOR, impacting issues such as maritime security, regional peace, and stability. In February 2024, Sri Lankan President Wickremesinghe addressed concerns about China’s growing presence in the Indian Ocean, assuring that Sri Lanka would not permit any actions that could jeopardize India’s security. Since January 2024, Sri Lanka has implemented a one-year ban on the operations of foreign research vessels within its Exclusive Economic Zone, a decision that reportedly displeased China. During a recent visit to New Delhi in 2024, Sri Lankan Foreign Minister Tharaka Balasuriya emphasized the deep civilizational and historical ties between India and Sri Lanka, while acknowledging China as a significant trading partner, like many of Sri Lanka’s other key trade relationships. In the same year, President Dissanayake’s visits to India highlighted the JVP’s new pragmatic stance, emphasizing trade, infrastructure development, and maritime security as areas of collaboration. Sri Lanka’s economic crisis further propelled this shift, as India extended significant financial support to stabilize the island nation.
Economic and Strategic Cooperation
In 2022, Sri Lanka granted provisional approval to Adani Green Energy for the development of two wind projects in Northwest Mannar and Pooneryn. In October 2023, Sri Lanka’s state-run dairy companies, managed by the National Livestock Development Board, formed a joint venture with India’s Amul Dairy. Moreover, discussions have been underway about involving India’s Adani Group in the management of Sri Lanka’s key international airports. In February 2024, Sri Lanka’s President Ranil Wickremesinghe virtually launched Phase-IV of the Indian Housing Project, ‘Bharat-Lanka’, aimed at building 10,000 homes for plantation sector workers in Sri Lanka with Indian grant assistance. The same month, India introduced its Unified Payment Interface in Sri Lanka, further enhancing financial connectivity between the two nations, alongside the approval of the Indian Rupee as a designated currency in 2023.
Conclusion
The evolving relationship between India and Sri Lanka under President Anura Kumara Dissanayake’s leadership marks a significant shift in South Asian diplomacy. The JVP’s newfound engagement with India, moving away from its historical opposition, highlights the potential for pragmatic diplomacy to overcome long-standing political differences. Despite challenges such as the end of the Chinese research vessel moratorium, fishing disputes, and scrutiny over Indian investments, the India-Sri Lanka partnership remains more resilient than India’s relationships with many of its other South Asian neighbours. This shift reinforces the importance of cooperation and mutual understanding in navigating regional dynamics, offering hope for a more stable and constructive future for both nations in an increasingly complex geopolitical landscape.
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