India to Gain ‘Advantage’ over China in Sri Lanka?

Recently, a significant leadership change occurred in Sri Lanka as the country elected a new President (Anura Kumara Dissanayake) amidst efforts to recover from a severe economic crisis. Observers are closely watching how Dissanayake balances relations between major powers, particularly India and China, especially given the island nation’s strategic geopolitical location in the Indian Ocean.

India-Sri Lanka Relations

• India and Sri Lanka share a long-standing relationship characterized by geographical proximity and cultural ties. In response to the recent economic crisis, India provided substantial financial assistance, which helped Sri Lanka sustain essential imports and stabilize its economy.
• India and Sri Lanka share not only close trade relations, but also ethnic and religious ties.
• Sri Lanka has an important place in both India's 'Neighbourhood First' policy and 'SAGAR' vision.
• Trade Relations: India stands as Sri Lanka’s largest trade partner and one of its top investors, with total foreign direct investment surpassing USD 2.2 billion.
  • In 2021, India accounted for the largest share of foreign direct investment at USD 142 million, focusing primarily on sectors such as petroleum, manufacturing, real estate, telecommunications, and banking and financial services.
• However, in recent years, Sri Lanka has become an arena of geopolitical rivalry and maritime competition between India and China.

What about China?

• Sri Lanka President Anura Dissanayake belongs to a party with strong left-wing ideology, which has led to a Marxist insurgency in the past.
• This ideological affinity could present China with another opportunity. However, Sri Lanka’s engagement with the neighbourhood, especially India, could be dependent on how India engages with Sri Lanka.
• The relationship has been on a stronger footing off-late, making China’s ambition in Sri Lanka not easy.
• Last year, India and Sri Lanka agreed to strengthen the maritime, air, energy, tourism, power, trade, and education sectors.
• India has already made significant moves to counter China’s expansionist agenda in the island.
• India has also invested in a part of the Colombo port, Kankesanthurai port, Trincomalee port, Jaffna and Hambantota airports, amongst other infrastructure projects like a two-way petroleum pipeline.

Advantages for India

A strengthened relationship with Sri Lanka offers several advantages for India:

• Geopolitical Stability: A stable Sri Lanka helps mitigate the influence of other regional powers, enhancing security in the Indian Ocean.
• Economic Opportunities: With significant investments already made, India can further expand its presence in sectors such as energy, telecommunications, and manufacturing.
• Regional Connectivity: Proximity allows for better integration of economies, providing opportunities for trade and collaboration with South India.
• Influence in the Region: Strengthening ties helps India maintain its strategic interests in the Indian Ocean and counterbalance the influence of other nations.

Why Sri Lanka Matters to India?

Sri Lanka's significance to India is rooted in several key factors:

• Strategic Location: The country is strategically located at the crossroads of busy shipping routes. Positioned in the Indian Ocean, Sri Lanka is a crucial hub for maritime trade routes, impacting regional trade and security.
• Cultural Connections: The historical and cultural links between the two nations foster a sense of shared identity that is important for bilateral cooperation.
• Economic Interdependence: The strong trade relationship and presence of an Indian diaspora in Sri Lanka enhance economic ties and mutual benefits.
• Regional Security: The stability and alignment of Sri Lanka can influence broader regional dynamics, making it essential for India’s strategic interests. The interests of India and Sri Lanka are “closely intertwined” in the realms of security and defence.