“Sri Lanka should look at doing more business with India”
Sri Lanka should look at doing more business with India and deepening bilateral trade and foreign direct investment (FDI) flows with India, said Economist and Senior Research Associate at ODI in London Ganeshan Wignaraja.
“The changing outlook for Sri Lanka makes it opportune for India-Sri Lanka ties to shift from an aid relationship to investments.”
India and Sri Lanka should actively promote bilateral FDI flows by better marketing to investors, liberalising FDI entry regulations and cutting the red tape from hampering investors through digitisation.
Already this shift is taking place with the conglomerate Adani Group recently committing to investing US$1,142 million in wind power renewable energy plants in the Mannar basin and the West Container Terminal in Colombo Port. Adani’s huge projects are equivalent to nearly 67% of all Indian FDI into Sri Lanka between 2005-2019.
A miles-long transmission line running through the Indian Ocean to promote bilateral power trade is also being discussed. It was reported that the conglomerate Tata Group, which acquired Air India in January 2022, was currently in talks to buy Sri Lankan Airlines. “One hopes that these Indian infrastructure projects will be transformative for Sri Lanka by bringing capital as well as transferring skills and technology.”
Confidence built through these investments could encourage more Indian FDI in Sri Lanka in agro-processing, textiles and light manufacturing, and information technology services sectors.
Similarly, globalising Sri Lankan firms should invest in companies in South Indian states such as Brandix in textiles, Dilmah in tea and tourism, and John Keels Holdings in food processing and tourism. India and Sri Lanka should actively promote bilateral FDI flows by better marketing to investors, liberalising FDI entry regulations and cutting the red tape from hampering investors through digitisation.
Early resumption of talks on a comprehensive India-Sri Lankan trade deal to promote regional rules-based trade and FDI would be the icing on the cake.
The goal should be to achieve a high-standard trade deal to facilitate deep integration in supply chains and services by adopting the so-called 21st-century trade rules. With political will to implement the IMF Programme, Sri Lanka could see some economic normalcy in a few years. India-Sri Lanka ties should shift from an aid relationship to deepening trade and investment flows for mutual benefit.
“A growing Sri Lanka would be a major win for Prime Minister Narendra Modi’s Neighbourhood-First policy and enable India to steal a march over China as an emerging donor during its G20 presidency.”