New Era for Sri Lanka-India Relations

July 26, 2019        Reading Time: 5 minutes

Reading Time: 5 min read

Image Credits: Maithripala Sirisena/flickr

*Chitranganee Wagiswara

With the re-election of Prime Minister Narendra Modi in India, the foreign policy orientation of India is expected to continue unchanged. The Prime Minister demonstrated the emphasis on the ‘neighbourhood first policy’ by choosing the Maldives and Sri Lanka as his first foreign visits.1 The invitation to the Heads of States of Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) countries for his inauguration ceremony,2 was another indication of the Prime Minister’s desire to forge closer links with India’s neighbours.

Due to the lack of progress of SAARC, as a regional organisation, the focus on BIMSTEC reflects a shift towards the East. India has taken the leadership on forging closer connectivity and economic integration with countries in South Asia and South East Asia. This shift also resonates with the ‘Look East’ policy later defined as ‘Act East’ policy of India.3

Addressing Sri Lanka’s business community at the Ceylon Chamber of Commerce recently, Prime Minister Modi noted that the world’s engagement with India is at a “new level” due to the country’s growing economic power and status as a regional power.

In this context India-Sri Lanka bilateral relations could also be taken to a “new level.” Sri Lanka has the potential to be India’s strongest economic partner in the South Asian region. It is, therefore, opportune to consolidate and build on the relationship, given the close links established between the two countries. In this context, Sri Lanka’s foreign policy needs to factor in economic diplomacy and its geo-strategic goals, while taking into consideration its national interest.

Economic Relationship

While the political interactions between the leaders of India and Sri Lanka are maintained and promoted at the highest level with frequent visits and meetings, such connections facilitate economic and trade links which could be pursued at a greater pace. On trade relations, the balance of trade has been heavily in favour of India with Sri Lanka’s exports to India at approximately USD 689 million, and India’s exports to Sri Lanka at approximately USD 4.5 billion in 2017.4 The free trade agreement (FTA) between the two countries, signed in 1998 and implemented in 2000,5 have facilitated trade growth. Issues such as non-tariff barriers (NTBs) and market access are relevant items that need to be addressed. Sri Lanka could also actively pursue close economic links and integration with the five Southern States in India, namely Kerala, Karnataka, Tamil Nadu, Andhra Pradesh and Telangana, that have a combined population of 250 million and a GDP of USD 450 billion.6 In this context, the two countries need to recognise the asymmetries between Sri Lanka and India and work together to create a viable economic environment to ensure mutual benefits.

Similarly, the proposal to have an Economic and Technology Agreement (ETCA), which goes beyond the trade-in goods, to include services, investment and technical cooperation, is an agreement which requires in-depth study. There have been some reservations, especially in Sri Lanka, on opening up certain sectors, especially services.7 Both sides must identify the issues and focus on niche areas and negotiate from a progressive point of view to reap mutually favourable results.

Over the years, India has contributed a substantial amount of Official Development Assistance to Sri Lanka’s economic development.8 There are many economic projects being implemented or negotiated in the areas of energy, housing, agriculture, and development of ports and airports, roads and railways, to name a few. It is important to bear in mind that to maintain and promote trade and economic relations, other parameters such as investments, infrastructure, technological means, political stability, and appropriate institutions and regulations, are necessary.

With India’s envisaged economic reforms and rising prosperity, it is in Sri Lanka’s interest to look for opportunities and forge a greater partnership with India. It is also worth noting that India has expressed certain apprehensions regarding the commercial ventures of other third-parties in Sri Lanka.9 Sri Lanka has specifically stated that such commercial ventures will not compromise bilateral nor regional security considerations.

Security Issues

An important aspect of India-Sri Lanka relations is the close military and security links which is of great importance, especially in the current context. While strong bilateral links in the military field are maintained, the need to work together on threats posed by terrorism, religious fundamentalism, people smuggling, and other non-traditional threats, should be seen as vital areas for joint action. Strengthening intelligence sharing networks are of strategic interest to achieve long term goals for a stable and peaceful neighbourhood in order to focus on national development.

In the wider context, the strategic landscape includes the maritime domain with the Indian Ocean gaining a greater focus on a global scale. India and Sri Lanka have the advantage of the geopolitical location—being in the centre of transoceanic sea routes and, at the crossroads of the Persian Gulf, Central Asia and South East Asia. Today the Indo-Pacific is seen as a crucial region of the global trade and energy market, and the interest of the global powers is a factor that impacts the foreign policies of other countries in the region. Both India and Sri Lanka have recognised the need to work together with other countries, to address opportunities as well as challenges.

Two outstanding issues that may impact India-Sri Lanka relations are the poaching and bottom trawling practices by Indian fishermen, and the nearly 61,000 Sri Lankans who continue to live in refugee camps in Tamil Nadu.10 These issues are being looked at by both sides in order to arrive at mutually acceptable solutions.

People-to-people links

Due to the historical and cultural affinities between Sri Lanka and India, the application of soft diplomacy is a vast resource that has not been used to its full potential. Annually over 200,000 Sri Lankans visit India, including a vast number for the purpose of pilgrimage.11 On the other hand, approximately 430,000 Indian tourists visit Sri Lanka, making India the highest tourist-generating country for Sri Lanka.12 Both countries could work together to develop the Buddhist trail in India, and the Ramayana sites in Sri Lanka, to generate greater interest and increase the numbers of tourists substantially. In addition to tourism, the common interest in music, drama, dance, the film industry, sports, (especially cricket) higher education, and exchange programmes for academics, are areas that offer vast opportunities to promote people-to-people links. Such interactions not only link people at the personal level, but also give people avenues to experience and appreciate the diverse cultures and create unity and a better understanding at the grassroots level.


India is Sri Lanka’s closest neighbour. With the rise of India, and a new Indian identity and profile in the region, Sri Lanka and India should endeavour to work and support each other not only at the bilateral level, but also at the regional and multilateral level. Given the shared close traditional relations based on friendship and understanding, we have the opportunity and the capacity to take the relationship to greater heights.


1Daily FT. (2019). Modi makes a mark in first SL trip after winning second term. [Online] Available at: [Accessed 22 July 2019].

2Economic Times. (2019). Government invites BIMSTEC leaders for swearing-in ceremony on May 30. [Online] Available at: [Accessed 22 July 2019].

3Institute for Defence Studies and Analyses, New Delhi. (2018). Significance of India’s Act East Policy and Engagement with ASEAN. [Online] Available at:  [Accessed 22 July 2019].

4Department of Commerce, Ministry of Industry and Commerce. (2017). International Trade Statistics of Sri Lanka – 2017. [Online] Available at:—New2017.pdf [Accessed 22 July 2019].

5Department of Commerce. (2019). Indo – Sri Lanka Free Trade Agreement (ISFTA). [Online] Available at: [Accessed 22 July 2019].

6The Economic and Statistical Organization, Punjab. (2019). State Wise Data. [Online] Available at: [Accessed 22 July 2019].

7Daily FT. (2016). Economics Diplomacy and ETCA. [Online] Available at: [Accessed 22 July 2019].

8High Commission of India. (2019) Development Co-operation. [Online] Available at: [Accessed 22 July 2019].

9Daily FT. (2018). India, Sri Lanka, Indian Ocean and the coercive diplomacy of India. [Online] Available at:–Sri-Lanka–Indian-Ocean-and-the-coercive-diplomacy-of-India/4-665785  [Accessed 22 July 2019].

10The Times of India. (2019). Sri Lanka refugees in Tamil Nadu in a quandry on returning to Homeland. [Online] Available at:  [Accessed 22 July 2019].

11Centre for Indian Ocean Studies, Osmania University, Hyderabad. (2013). India-Sri Lanka Relations Strengthening SAARC. [Online] Available at:[Accessed 22 July 2019].

12Sri Lanka Tourism Development Authority. (2018). Monthly Tourist Arrivals Report. [Online] Available at  [Accessed 22 July 2019].

*Chitranganee Wagiswara is a former Foreign Secretary of Sri Lanka, and currently a member of the Board of Management of the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI). The opinions expressed in this piece are the author’s own and not the institutional views of LKI, and do not necessarily reflect the position of any other institution or individual with which the author is affiliated.

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