Sri Lanka and India to Create Closer Connections
From 21 to 23 July 2023, the President of Sri Lanka, Mr Ranil Wickremesinghe, was on visit to India. It will be his first official visit to India since he took office.
The Indian Ministry of External Affairs highlighted that Sri Lanka is an important partner of India within the Neighbourhood First Policy and #SAGAR Vision.
The central theme of the partnership appears to be the reinforcement of #connectivity across all domains. In a joint statement released following the meeting, the areas of cooperations were listed:
- Maritime Connectivity
- Air Connectivity
- Energy and Power Connectivity
- Trade, Economic and Financial Connectivity
- P2P Connectivity
India and Sri Lanka will cooperate to develop the seaport and logistics infrastructure at Colombo, Trincomalee and Kankesanthurai. In order boost #P2P exchanges and tourism, the passenger ferry services will resume and be enhanced, notably between Nagapattinam in India and Kankesanthurai in Sri Lanka as well as mutually agreed places. Similarly, lights between Jaffna and Chennai will resume.
In the same breath, India and Sri Lanka will leverage their long and deep religious cultural heritages to promote Pilgrimage Tourism. Sri Lanka is a well-known place depicted in the Ramayana scriptures and boasts several ancient Hindu, Buddhist and other religious sites of interest.
An MoU to cooperate on #RenewableEnergy was also signed which called for development of solar and wind energy. The target is to support the #EnergyTransition of Sri Lanka towards 70% of green energy in the energy mix by 2030. India and Sri Lanka will connect their power grids to enable bidirectional electricity trade. India has lower electricity rates than Sri Lanka while Sri Lanka has huge green energy potential.
On the economic front, both sides will undertake discussions on an Economic and Technology Cooperation Agreement (ETCA) to enhance bilateral trade and investments. The two countries agreed to designate the Indian Rupee (INR) as the trade settlement currency and to operationalize the Unified Payment Interface (#UPI) gateway for digital payments.
Leveraging on the scale of the India market, Sri Lanka can secure cheaper petroleum imports via India, as opposed to importing on its own. As a matter of fact, Sri Lanka experienced fuel shortages in 2022. The use of INR will also the risk of low foreign exchange reserves.
Since Sri Lanka defaulted on its foreign debt amidst the COVID pandemic in April 2022, India has poured up to USD 4 billion, as part of its Neighbourhood First Policy, into Sri Lanka to avoid an economic crisis.
Finally, Sri Lanka will take advantage of India‘s highly developed and regarded digital public infrastructure to boost its catalyze its own #digitalization pathway.
The complementary nature of the Indian and Sri Lankan economies will be explored to uncover business opportunities. In doing so, the asymmetrical market sizes will be considered in order to avoid any backlash and prevent unintended negative impacts.