How Sri Lanka, Pakistan crises affect India

Sri Lanka and Pakistan, two of India’s next-door neighbours have plunged into deep economic and political crises. While Sri Lanka’s Cabinet of Ministers, in the wake of its worst economic crisis, have resigned with immediate effect, Pakistan Prime Minister Imran Khan has been de-notified as the prime minister of the country. 

Not only is stability in the region essential, it is paramount for the smooth sailing of each nation in the region. Sri Lanka and Pakistan’s crises will, needless to say, have their own impact on India.

Here’s a look at what’s happening and how it will impact India:

SRI LANKA

Sri Lank’s economy was in tatters due to a combination of factors. It was a crisis a long time in the making. Bad schemes and policies, mixed with the impact of the Easter bombings of 2017 and COVID-19, especially on the tourism sector - one of its heavy hitters, snowballed into a deep economic crisis. 

Inflation in Sri Lanka is currently unprecedented, with citizens queueing up for even the essentials. Wheat and rice are being sold for Rs 220 per kg and Rs 190 per kg in Colombo, while coconut oil is being sold for Rs 850 per litre. A single egg is priced at Rs 30, and a 1 kg pack of milk powder costs Rs 1,900, as found by an India Today ground report.

The island nation's retail inflation already touched 17.5 per cent in February and food inflation has soared to over 25 per cent.

With the resignation of the Cabinet of Ministers, the economic crisis has also turned into a political one. Political experts said the ministers came under intense pressure from the public over the government's alleged "mishandling" of the economic crisis, triggered by the shortage in the foreign exchange reserve.

The enraged public has demanded the resignation of President Gotabaya Rajapaksa.

Prominent voices in the country have called upon the government to fix the mess they are in. Former Sri Lankan cricketers Mahela Jayawardena and Kumar Sangakkara have asked the government to get help from the right, qualified people to help fix the “man-made” problems.

Sri Lanka's Opposition leader, Sajith Premadasa, said, “The basic cost-benefit analysis approach must be used in decision-making, but I doubt the government is aware of what that entails." He, in an interview with India Today, further added, “We must take a multifaceted approach and approach international monetary institutions to ensure that we reach an agreement that does not impose hardship on the people of the country."

Where India fits

Sri Lanka has sought an additional credit line of $1.5 billion, on top of the $1 billion support that was extended by India to help pay for critical imports. New Delhi has indicated it would meet the request for the new credit line, to be used for importing essential items such as rice, wheat flour, pulses, sugar and medicines. In addition to the credit lines, India this year extended a $400-million currency swap and a $500-million credit line for fuel purchases to Sri Lanka.

India has also sent around four consignments of 40,000 metric tonnes of diesel to mitigate the spike in power cuts in Sri Lanka. India also sent 40,000 tonnes of rice in prompt shipments to Sri Lanka.

India is also dependent on the Colombo port for global trade as 60 per cent of India’s trans-shipment is handled by the port. India has been one of the largest trading partners of Sri Lanka, and one of the top tourism sources. India has annual exports of $4.8 billion to Sri Lanka, which account for 1.3 per cent of its total exports. 

India has also invested in areas of tourism, real estate, manufacturing, communications, petroleum retail etc in the country. India was one of the biggest sources of foreign direct investment (FDI) in Sri Lanka. Some of the biggest companies in the country have invested in Sri Lanka. 

“It has been stressed to Government of Sri Lanka that the development of infrastructure in Sri Lanka in areas such as ports and energy with foreign investment from India would be a mutually beneficial proposition, especially since most of the transshipment at Colombo Port is to and from India,” said Minister of State for External Affairs V Muraleedharan told the Lok Sabha.

However, it must be mentioned that the Sri Lankan government has also asked China for a $2.5 billion emergency aid, which could increase China’s influence in the country. 

PAKISTAN

Pakistan has been plunged into yet another political turmoil. PM Imran Khan sought fresh elections after dissolving the parliament. The deputy speaker of parliament, who is a member of Khan's party, blocked an Opposition no-confidence motion that Khan had been expected to lose. The Opposition has called the move a treason. Bilawal Bhutto Zardari, head of the opposition Pakistan People's Party, promised a sit-in at parliament, as mentioned in a Reuters report. Khan, on the other hand, has claimed that the move to oust him is orchestrated by the US. 

The Opposition blames Khan for not being able to revive the economy or crack down on corruption. Pakistan's inflation is high, its foreign reserves are dwindling and its deficit is widening. It is also in a tough International Monetary Fund bailout programme. 

It must be mentioned here that no prime minister has finished a full five-year term since Pakistan's independence from Britain in 1947.

Where India fits

PM Khan has been a vocal critic of Prime Minister Narendra Modi and his government. But tensions along the de facto border are at their lowest level since 2021. The Pakistan military controls policies in sensitive areas. 

Indian political commentator Karan Thapar said the Pakistani military could put pressure on a new civilian government in Islamabad to build on the successful ceasefire in Kashmir, as mentioned in a Reuters report.

(With agency inputs)

Also read: What’s happening in Sri Lanka? All you need to know about its economic crisis

Also read: No PM in Pakistan ever completed full term in office; all you need to know