Sushma Ramachandran

India and Sri Lanka ties are looking up since the newly anointed President Anura Dissanayake visited New Delhi. The tension that the relationship between the two countries went through has settled down. Dissanayake's visit may have also eliminated some worries as he had been viewed as pro-China and anti-India. As head of state, he now evidently seeks to project a more neutral image, especially in the backdrop of the economic distress faced by his country in recent years.

Besides, it would be difficult to overlook the fact that India provided consistent support throughout the crisis by stepping forward with assurances to enable clearance of a bail-out from the International Monetary Fund. (IMF). By making India the first port of call after assuming office, Dissanayake appears to have recognized the sterling role that New Delhi played in helping Sri Lanka recover from its foreign exchange crisis.

The change in attitude represents the outcome of a measured policy aimed at supporting a smaller neighbour in a time of need. India went the extra mile by ensuring that food and fuel supplies were ferried to Sri Lanka when the economy faced acute shortages of these commodities. It also did not hesitate to offer credit of four billion dollars to provide additional support to an economy mired in a shortage of foreign exchange resources and inflationary pressures.

Indian playback singer Papon performing in Colombo on India's Republic Day celebrations

In addition, it stepped forward quickly to ensure that the much-needed IMF loan of 2.9 billion dollars was not stalled due to the lack of support from the country’s creditors.

The result is that discussions between the two sides during the visit were not only cordial but also outlined specific areas for substantive cooperation. Significantly, these did not include the Adani wind energy project which has been criticised for its potential adverse environmental impact. The new government has already declared that it will review the project in light of these environmental concerns. Yet the focus is clearly on infrastructure development.

The new President said that Adani group investments would be evaluated purely on merits. He clarified that this would not be affected by reports of the company’s indictment in U.S. courts. In an interview, he said they would be looking at how the Adani group performed in Sri Lanka and if it worked in a manner that suited their initiatives, they did not mind working with them.

The areas covered by the joint statement include maritime security, defense cooperation, and expansion of economic and trade ties. Digital connectivity and energy cooperation, for instance, have been highlighted as sectors where bilateral cooperation can yield positive benefits for Sri Lanka. Discussions are reported to have been held on LNG supply and development of Trincomalee as a regional energy and industrial hub along with renewable energy schemes.

In this context, it would be an opportune time to expand and upgrade the existing India-Sri Lanka Free Trade Agreement. The pace of talks on the proposed Economic and Technical Cooperation agreement also needs to be picked up, as it has been under negotiation for quite some time.

Foreign Secretary Vikram Misri meeting Bangladesh foreign secretary Md. Jashim Uddin in Dhaka

While India’s ties with Sri Lanka are clearly on the mend,  the situation is not the same on the northern, western, and eastern borders. Though tensions with China have eased in recent days, there is little prospect of the trust deficit being bridged shortly. There need not be any comment over the ties with Pakistan as these have legitimately been frozen for quite some time now.

As for Nepal, it has recently concluded a framework agreement to go ahead with China’s Belt and Road Initiative’s infrastructure projects. This is despite India’s strenuous opposition to the BRI because it impinges on its territorial integrity. Nepal Prime Minister K.P. Sharma Oli’s decision to make his first foreign visit to China rather than India, as has been the case till now, is being viewed as a major shift in that country’s policy. 

On the east, relations with Bangladesh have plummeted to an all-time low with the advent of the Mohammad Yunus-led government. In other words, India is surrounded on most sides by countries bristling with animosity. This may not have any immediate repercussions on the domestic economy despite the sizable investments made by Indian industry in Bangladesh, especially in the textile sector. There have been considerable benefits to this country’s neighbours by expanding economic cooperation.

This includes investments by Indian industry which have provided considerable employment opportunities. At the same time, with bilateral relations at a low ebb, there is little chance of integrating economies in the region as was envisaged when the South Asian Association for Regional Cooperation (SAARC) was originally set up.

This is even though the South Asian Free Trade Agreement (SAFTA) was concluded about 20 years ago. Both SAARC and SAFTA remain in cold storage as fissures between countries in the region continue to widen. Regrettably, this makes it virtually impossible to harness the potential economic benefits of a South Asian economic zone. An integrated South Asia would enable the smaller countries in the region to access the larger Indian market while energy cooperation could potentially reduce fuel costs significantly. In some cases, similar commodities are being exported like tea and spices.

ALSO READ: Ashish Ray's book chronicles how INA Trials forced British to leave India

Joint development of strategies could enable exports to be complementary rather than competitive in export markets. Infrastructure development in the neighboring countries could also be stepped up considerably with the support of industry from India. Despite all these potentially positive outcomes, it looks as if a South Asian economic union is a far cry, given the political realities on the subcontinent.