India-Sri Lanka Relations: Historical Background, Economic Crisis, Latest Developments, Challenges in Bilateral Relationship, Way Forward & UPSC PYQs

India and Sri Lanka share deep cultural ties rooted in religion, language, and history. Sri Lanka's strategic location in the Indian Ocean and the importance of Colombo and Trincomalee ports make it vital for India's maritime security and connectivity. It is also significant for India's SAGAR vision and for balancing China's growing influence in the region.

From a UPSC perspective, India–Sri Lanka relations are important for GS-II (International Relations) and GS-III (Internal Security & Border Management). Key themes include maritime security cooperation, connectivity and development projects, Tamil reconciliation and the 13th Amendment, fishermen disputes, and China’s growing influence through ports and infrastructure. The relationship reflects India’s shift from conflict intervention to a development-focused partnership aimed at regional stability and economic cooperation.

Historical Background of Sri Lanka

• Ethnic composition: Sri Lanka is home to two major ethnic groups—the Sinhalese majority and the Tamil minority—whose contrasting colonial experiences laid the foundation for future tensions.

• Language Act, 1956: This act gave primacy to the Sinhalese language. The act was violently opposed by the Tamil-speaking minority, leading to rioting and the emergence of militant groups.

India-Sri Lanka: Historical Context

• 1978→ Unitary Constitution of Sri Lanka concentrates legislative, police and land powers in the central government.

• Civil War: During the late 1980s, Sri Lanka faced a brutal civil war between the Sri Lankan government and the Liberation Tigers of Tamil Eelam (LTTE), a militant organisation fighting for an independent Tamil homeland in the northern and eastern parts of the country.

• 1987 – Indo-Sri Lanka Accord

• Signed between Indian PM Rajiv Gandhi and Sri Lankan President J.R. Jayewardene to resolve the Sri Lankan ethnic conflict. 

• It led to the 13th Amendment of the Sri Lankan Constitution and the creation of Provincial Councils. 

• However, the implementation has been partial and inconsistent. 

• Key Elements of the Accord:

• Aimed to decentralise power and grant autonomy to Tamil-majority areas.

• Tamil and English are to be recognised alongside Sinhala as official languages.

• Emergency in the North-Eastern provinces was to be revoked to restore normalcy.

• Tamil militant groups, especially the LTTE, were expected to disarm.

• Implementation Challenges:

• Although provincial councils were created, land and police powers remained with the central government.

• The amendment was seen by Sinhala nationalists as an imposition by India, undermining the unitary character of the 1978 Constitution.

• Irregular elections and continued central control further weakened the spirit of decentralisation.

• Indian Peacekeeping Forces in Sri Lanka: On request from Jayewardene, India deployed ~100,000 Indian Peace-Keeping Force (IPKF) to disarm the LTTE under the 1987 accord.

• Operation Pawan, the code name for the 1987 Indian Peace Keeping Force (IPKF) operations, was launched to disarm the LTTE and wrest control of the Jaffna Peninsula in northern Sri Lanka."

• Unfortunately, the event is today remembered only for its unpleasant fallout after India unwittingly got entangled in a counter-insurgency war with the LTTE.

• Over 1,200 Indian soldiers lost their lives during the mission, and the prolonged conflict ultimately strained Indo-Sri Lanka relations.

• Change in India’s Approach: The assassination of Rajiv Gandhi by the LTTE in 1991 led India to adopt a non-interventionist stance in Sri Lanka’s internal conflict.  After Rajiv Gandhi’s assassination, India scaled down its active involvement in Sri Lanka and adopted a passive approach to the Sri Lankan Tamil issue.

• End of Civil War: Then-President Mahinda Rajapaksa declared the end of a 26-year war in 2009.

• International rights groups claim at least 40,000 ethnic Tamil civilians were killed in the final stages of the war, but the Sri Lankan government has disputed the figures.

• Current Developments: Recently, Anura Kumara Dissanayake came to power. His party, Janatha Vimukthi Peramuna (JVP), strongly opposes the Indo–Sri Lanka Accord and maintains an anti-India stance.

• There are moves to cancel Indian projects like Adani’s 450 MW wind power project, citing environmental and national interest.

Economic Crisis of Sri Lanka

Historically reliant on tea, tourism, and textiles, Sri Lanka’s economy took a sharp downturn due to a series of missteps:

• Agricultural Production: The Sri Lankan government banned fertiliser imports and mandated a shift to organic farming, leading to the collapse of the agriculture sector. This resulted in food shortages, forcing the country to import food grains.

• Tourism: Tourism is the mainstay of Sri Lanka. However, the April 2019 Easter Day bombing in Sri Lanka created fears among tourists, and the number of tourists coming to Sri Lanka dropped drastically. Tourist arrivals fell by 71 per cent in May 2019. 

• COVID-19 Lockdown: COVID-19-induced lockdown worsened the situation. Foreign tourists coming to Sri Lanka almost dropped drastically in 2020. Exports of tea, rubber, spices, and garments suffered.

• External Debt: Sri Lanka had almost USD 50 billion of external debt, which needed to be serviced. Sri Lanka faced a balance of payments crisis. 

• China’s Debt Trap Policy: China was promoting ‘white elephant’ projects like the Hambantota Port. Unable to repay its debt, Sri Lanka leased the port to China for 99 years, officially handing it over in December 2017.

Relevance of Sri Lanka to India

The significance of Sri Lanka for India is as follows:

Strategic Location

• India shares a maritime boundary with Sri Lanka, making it important for maritime security, terrorism, insurgency, sea piracy, and issues like human and drug trafficking.

• Sri Lanka holds a strategic position in the Indo-Pacific, which makes it important for the safety and security of the Indo-Pacific.

• Located near crucial shipping lanes and the Strait of Malacca, Sri Lanka plays a central role in global maritime trade.

• Approximately 70 per cent of India’s cargo passes through Colombo Port, making it South Asia’s largest transhipment hub.

• Increased Chinese presence, particularly in Hambantota, heightens Sri Lanka's strategic importance.

• Sri Lanka is also a key partner in India’s Neighbourhood First Policy.

• Defence Cooperation: India and Sri Lanka conduct joint Military (Mitra Shakti) and Naval exercises (SLINEX).

Economic Relevance

• India and Sri Lanka have a Free Trade Agreement (FTA) in place, which has helped foster economic ties.

• Economic and Technology Cooperation Agreement (ETCA) under an advanced level of negotiation.

• India hopes the ETCA will provide greater market access for products like automobiles, auto parts, pharmaceuticals, textiles, and chemicals, as well as services.

• India is not only a key investor in Sri Lanka but also one of its most important trade partners. 

• Bilateral trade between the two countries reached $5.6 billion. 

• India is Sri Lanka's largest trading partner,2 top investor, and leading source of tourists.

•  The relationship between India and Sri Lanka peaked in 2022, when India was the only country to assist Sri Lanka during the worst period of its lingering economic crisis.

• To further support Sri Lanka’s economy, India provided $4 billion in aid.

• In January 2023, India played a crucial role in Sri Lanka's financial recovery by becoming the first country to submit a letter of support to the International Monetary Fund (IMF) for Sri Lanka’s financing and debt restructuring. This gesture was pivotal in securing Sri Lanka's credit from the IMF.

• In 2021, Sri Lanka settled a $400 million currency swap facility with India, further highlighting the strong economic cooperation between the two countries.

• It is also important for the safety and stability of the supply chain in the region.

• Sri Lanka is caught in a debt trap and hence in need of further support and cooperation.

Connectivity / Infrastructure

• India is developing partnerships with Sri Lanka across various multilateral institutions and initiatives.

• SAGAR (Security and Growth for All in the Region)

• IORA (Indian Ocean Rim Association)

• IONS (Indian Ocean Naval Symposium)

• Colombo Security Conclave

• India is working on a High Impact Community Development Programme, focusing on key sectors such as education, health, and basic infrastructure.

• Example: The "100 Model Village Programme" is an initiative launched by India.

• Digital connectivity has been bolstered by the launch of UPI (Unified Payments Interface) in Sri Lanka.

• India is collaborating with Russia to build the Mattala Airport, further enhancing regional connectivity.

• Indian private companies are involved in the East Colombo terminal.

• India is financing solar projects through the ISA (International Solar Alliance)

• India is collaborating through CDRI (Coalition for Disaster Resilient Infrastructure).

• India is also pushing forward with infrastructure projects in Jaffna, contributing to the development of northern Sri Lanka.

China Factor

• China's influence in Sri Lanka has been growing, marked by the presence of Chinese submarines and an expanding naval presence in the region. 

• Through diplomatic pressure, China has been influencing Sri Lanka's political and economic decisions. A significant development is the 99-year lease agreement for the Hambantota Port, which deepens China's strategic foothold in the region.

• This growing Chinese presence aligns with its "String of Pearls" strategy, which seeks to establish a network of Chinese-controlled ports across the Indian Ocean. 

• Sri Lanka's increasing economic interdependence on China has raised concerns about a potential debt trap, as China has become Sri Lanka’s largest trading partner, further solidifying its role in the country's economic landscape.

Cultural Relevance

• India and Sri Lanka share civilizational and religious links

• India wields immense soft power through its global influence in fields like movies, music, and cuisine.

• India can extend the Buddhist Circuit and the Ramayana Circuit, enhancing religious and cultural tourism between the two countries.

• Cricket diplomacy can be an effective tool to enhance and further develop relations between countries.

• A large share of tourists in Sri Lanka come from India.

Issues / Concerns in India-Sri Lanka Relations

The recent issues in India-Sri Lanka Relations are:

• Katchatheevu Island: The sovereignty over Katchatheevu Island remains a sensitive issue between India and Sri Lanka. There are concerns in India, particularly in Tamil Nadu, regarding the rights of Indian fishermen to access traditional fishing grounds in the area.

• Maritime Agreement: Under the 1974 Indo-Lanka Maritime Agreement, India ceded Katchatheevu Island to Sri Lanka, which included fishing and resting rights for Indian fishermen. 

• Sri Lanka has not fully respected the fishing rights outlined in the agreement.

• Fishermen Disputes (Deep Sea Trawlers): Sri Lankan authorities frequently arrest Indian fishermen who enter Sri Lankan waters, and in some cases, they have been fired upon. These actions have created significant tension and stress in India-Sri Lanka relations.

• Tamil Ethnicity issue: Emotional ties between Indian Tamils and Sri Lankan Tamils run deep. India's support for Tamil rights often causes friction with Colombo, especially after the painful legacy of the civil war and post-war reconciliation concerns.

Way Ahead

Measures to strengthen bilateral relations between the two countries are as follows:

• Diplomatic Engagement and Developmental Partnership: India should continue to engage Sri Lanka diplomatically, playing a key role as a developmental partner.

• Focus on Mutual Interests: Both countries should prioritise areas of mutual interest such as the blue economy, safety, and security of Sea Lines of Communication (SLOCs).

• Addressing Concerns and Strengthening Relations: India has provided more than 11 Lines of Credit (LOCs) to Sri Lanka, supported its fight against COVID-19 with vaccines, and given Sri Lanka diplomatic priority. Moving forward, India needs to work on closing its delivery deficit and addressing Sri Lanka’s concerns to further enhance the partnership.

• Multilateral Cooperation: India and Sri Lanka should focus on multilateral partnerships and work together to resolve conflicts, especially in countering China's growing presence in the region.

UPSC Previous Year Questions 

Q. ‘India is an age -old friend of Sri Lanka.’ Discuss India’s role in the recent crisis in Sri Lanka in the light of the preceding statement.