India should use the ‘window of opportunity’ to finalise a ‘stronger’ FTA with Sri Lanka, says economist

Economist Razeen Sally, who served as an advisor to Sri Lankas former President and Prime Minister Ranil Wickremesinghe.
| Photo Credit: RAGHUNATHAN S.R.

With Prime Minister Narendra Modi planning to visit Sri Lanka shortly, economist-writer Razeen Sally, who served as an adviser to Ranil Wickremesinghe during 2015-17 when the latter was Prime Minister of Sri Lanka, has called upon India to use the “window of opportunity available now” to finalise a “stronger” bilateral free trade agreement (FTA) with the neighbour.

In an interview with The Hindu on Tuesday evening, the 60-year-old academician, who had stints at the London School of Economics (LSE) and National University of Singapore (NUS), said the present Janatha Vimukthi Peramuna-led National People’s Power (NPP) government “is sympathetic to India and much less defensive vis-à-vis India than [those of the governments led by] the Rajapaksas.” Besides, there “is a change in the climate of opinion which is favourable to India”, as a result of what the country did during the 2022 economic crisis in Sri Lanka.

Closer ties

The proposed FTA could “cover services; allow freer movement of some classes of workers and overcome protectionist blockages in both countries — which are, I think, more on the Sri Lankan side,” the economist said, adding that closer relationship between the two neighbours “should not upset other powers — China and the U.S. — which have stakes in Sri Lanka.”

Emphasising that “it is not the job” of India to provide dollars of aid to Sri Lanka “in perpetuity,” Mr. Sally, however, renewed that the call for economic integration of the island-nation with southern States of India, an argument, which Mr. Sally himself admitted, was being made for over a generation.

In 2003, Mr. Wickremesinghe, then Prime Minister, while delivering a lecture in Chennai, floated the idea of building a bridge linking Rameswaram in Tamil Nadu with Talaimannar in the Northern Province of Sri Lanka as part of his larger vision of regional economic integration, encompassing his country and the southern region of India.

Huge potential

Acknowledging that “the political roadblock among certain sections of Sri Lanka is Tamil Nadu,” Mr. Sally emphasised that “geography essentially tells you what the advantages are. There exists huge potential for closer links between Sri Lanka and individual States — government to government, business to business, and business to government.” He added: “We are talking of Tamil Nadu and three or four other States that are economically doing very well.”

To a question whether the current government was receptive to the idea of Sri Lanka’s integration with the supply chain of south India, Mr. Sally replied that “it is up to groups outside the government — business and civil society — to make the case and find people in the government to champion the case.

On the political and economic situation in Sri Lanka, the economist, with both British and Sri Lankan roots, said the ruling NPP-JVP formation “has become the principal force” in the country with no effective Opposition in the political landscape. So far, there had been no corruption charges against it.

Economic situation

On the economic front, the stabilisation package, worked out by the previous Wickremesinghe government and the Central Bank of Sri Lanka, in line with the IMF [International Monetary Fund] programme, had gotten Sri Lanka out of an economic crisis. “But. it has not put Sri Lanka on the path of recovery.” The current government had to “go beyond the IMF reforms”, and the country should grow faster to pay its debts, which would become due in 2027, apart from generating extra revenue for other requirements.

However, if Sri Lanka stuck to only the IMF reforms, the country might “drift along at a fairly low level of economic growth, sowing the seeds for the next economic crisis.”