FM Nirmala Sitharaman Pushes for Closer Economic Ties with Sri Lanka

FM Nirmala Sitharaman Pushes for Closer Economic Ties with Sri Lanka

Ira Singh
05 Nov’23

India’s Finance Minister, Nirmala Sitharaman, has put forward a compelling case for enhanced economic integration between India and Sri Lanka at the India-Sri Lanka business summit in Colombo on Thursday.

Speaking at the India-Sri Lanka Business Summit in Colombo, Sitharaman said: “Global multilateral treaties are now receding. It is not happening. People are not wanting to talk about multilateral agreements. It might revive… All over the world, there is clear interest in having bilateral arrangements, arrangements in regional currencies.”Everybody is concerned about the conflict in the Middle East, the Ukraine war and the possibility of spike in fuel prices, she added.

Due to the ongoing war between Israel and Hamas, crude oil prices have touched a mark of $96 a barrel on fears of war spreading to the rest of the Middle East region, thereby disrupting supplies ,she said that India and Sri Lanka should also consider such an economic arrangement.

Finance Minister urged industry leaders for economic integration with Sri Lanka to mitigate the risk of the foreign exchange-driven crisis.Sitharaman assured India will continue to work closely with the island nation on debt restructuring discussions and extend support for its economic recovery.

“The task is cut out for industry leaders and it is for us to make sure that both countries will have economic integration to avoid supply chain disruptions so that there will be no foreign exchange- driven crisis impact on the country and also reduce dependency on any one economy,” the finance minister said on Thursday, at the India-Sri Lanka business summit in Colombo.

“Yet, there could be some arrangements (bilateral) between the two countries for issues such as logistical cost and essential goods etc which benefits both the nations,” she said.Sitharaman added that all over the world there is a clear interest in bilateral agreements/arrangements given the global situation.The countries would like to have arrangements in regional currencies so that there would not be shocks because of the currencies volatility; there will not be forex driven crises where two countries understand each other’s strength. Bilateral arrangements ensure that food security is in place and energy should not go on a roller coaster ride,she explained.

Highlighting the need of robust digital infrastructure,the minister said that the Indian government would be able to save Rs 2 trillion through 45 central schemes as technology has helped in weeding out middlemen and corruption.Further, she spoke on how Sri Lanka can utilise its solar and wind energy powers as there is huge rush for investments.She said that at least 5-6 years ago, the per unit cost of solar energy in India would be somewhere between Rs 14-15.With acute competition and favorable government policy, we saw healthy competition and India is today able to produce per unit of solar power costing Rs 2.45, she added.

Addressing an event to celebrate the 200 years of arrival of Indian-origin Tamils in Sri Lanka, the finance minister said some of the connectivity projects that have made progress include the commencement of passenger ferry services, negotiations on an economic and technological cooperation agreement, and UPI-based digital payments, which will be launched soon.

India, the finance minister said, had rendered an unprecedented financial assistance of over $4 billion for the people of Sri Lanka and was the first bilateral creditor to convey financing assurance to the International Monetary Fund.“(It) paved the way for others to provide similar assurances that formalised the IMF programme for Sri Lanka,” Sitharaman said.Sitharaman highlighted that 3,700 houses have already been handed over to the plantation workers, under the India-backed housing project scheme, and the foundation stone for 10,000 houses under phase four of the programme had also been laid.

By exploring various avenues for collaboration, reducing trade barriers, and enhancing connectivity, India and Sri Lanka aim to create a mutually beneficial economic partnership that will spur growth, development, and prosperity in the region. The proposed initiatives have the potential to open up new avenues for trade and investment, making the Indian Ocean region a vibrant hub of economic activity.