Candid in Colombo

PRIME MINISTER Narendra Modi’s visit to Sri Lanka from April 4 to 6 was his fourth official visit to the island nation in the last 10 years. He is also the first foreign leader to visit the country since the Janatha Vimukthi Peramuna (JVP)-led National People’s Power (NPP) alliance came to power in September 2024. While economic conditions mandated the new Sri Lankan government to pragmatically engage with its neighbour, the recent visit of the Indian prime minister demonstrated improving ties between the countries. Both governments seem more forthcoming in engaging and understanding each other’s interests and concerns.

When Sri Lanka descended into a multi-faceted crisis in late 2021, India strategised a four-pillar initiative to help its island neighbour. It focused on assisting the country with emergency supplies (food, medicine, fuel, etc) through aid and credit lines; helped with balance of payment through currency swaps, and debt restructuring; pushed for modernisation and development of the Trincomalee oil farms; and facilitated Indian investments in sectors of energy, logistics, connectivity, infrastructure, and ports. These four pillars were intended to further Indian interests, promote regional security, address Sri Lanka’s immediate and long-term concerns, and promote people-centric development.

By the ninth presidential election, this assistance stood at $4 billion. Given the magnitude of assistance and India’s economic clout, presidential candidate Anura Dissanayake recognised the need for a productive engagement with India. His promises of making Sri Lanka a hub of trade, tourism, and logistics could be fulfilled only by ensuring good ties with Delhi. This closely coincided with Delhi’s push for grants and investment-led growth in Sri Lanka. As a result, following his victory, India was his maiden destination for a foreign visit. In a very brief period, he has fostered close personal ties with the Indian leadership and grandly welcomed Modi to Sri Lanka. Dissanayake also awarded the country’s highest civilian honour to Modi during his visit. On multiple occasions, both leaders have referred to the other as “friend”.

During this two-day visit, India and Sri Lanka signed seven MoUs, cementing this grant and investment-led partnership. One MoU promoted inter-grid connectivity for the import/export of power—which will ensure energy security and revenues for Sri Lanka. Another MoU was related to the multi-sectoral grant assistance for Eastern Province, worth 2.37 billion LKR ($8 million) and covering over 33 projects related to education, health, agriculture, fisheries, etc. Besides, in the last six months, India has converted over $100 million of its loans to grants used for socio-economic and infrastructure development, such as renovating the Kankesanthurai Port in Jaffna, and rail connectivity. It has also offered a grant of $780 million to Sri Lanka, $265 million of which has been used for over 40 projects in the last 10 years alone, and $180 million is currently in the pipeline.

Equal weightage is being given to investments. In the last decade, India has invested more than $2 billion in Sri Lanka. But underscoring its capacity to bring external players to the region and promote development, India has convinced the UAE to help develop Trincomalee as an energy hub. This MoU was finalised during Modi’s visit. Modi and Dissanayake also virtually inaugurated the Sampur solar project, which is being implemented as a joint venture. Recently, the West Container Terminal of Colombo Port—a largescale Indian private investment (by the Adani Group)— also launched its operations.

There also seems to be a better understanding of each other’s concerns and interests. India has cautiously engaged with the new dispensation that was elected on the promises of broader political and economic reforms and transparency. India has not officially reacted to the government’s finalising and cancelling of Indian projects based on their politics and interests. For instance, the new government has reversed its decisions to privatise SOEs and critical infrastructure even as Indian firms expressed interest in investing in them. It has also pushed for the withdrawal of Adani energy projects in Mannar and Pooneryn, and has even maintained silence over the land bridge connectivity project. Similarly, Modi, for the second time, has avoided using the word “13th amendment” in the joint statement— hinting at India’s understanding of the new government’s complexities, and hopes for a quick and permanent solution to the ethnic issue.

On the other hand, realising India’s concerns about increasing Chinese influence, the Sri Lankan president has assured Delhi that the island nation would not cause any harm to Indian security or interests. Furthermore, both leaders signed the MoU on the defence sector, leading to an umbrella framework that intensifies and institutionalises cooperation in the defence industry, port calls, and capacity building. This also demonstrates the government’s willingness to be part of Delhi’s strategic and security architecture and reap mutual benefits from this cooperation. A crucial aspect of this defence cooperation from an Indian perspective is to also push back against China in the region, especially by helping Sri Lanka with hydrography capacity building. And by agreeing to deepen ties with India in the maritime sector, Sri Lanka has also demonstrated sensitivity to India’s concerns.

This is not to suggest Sri Lanka has abandoned China. China is the second-largest economy and Sri Lanka’s biggest bilateral creditor and investor; Colombo continues to be abuzz with several high-level Chinese visits. When Dissanayake visited China in January, he invited his counterpart to Sri Lanka. Both countries agreed to advance high-quality BRI cooperation, conclude the free trade agreement, and expand cooperation in logistics, green development and digital economy sectors. Beijing and Colombo have also agreed to cooperate on maritime domain awareness, capacity building, and disaster relief. Furthermore, China restructured its debts, renewed a currency swap worth $1.5 billion, and is now focusing on grants and investments, and resumed its paused projects.

The last six months have seen an increase in economic and pragmatic engagement between India and Sri Lanka, with both governments and leaders engaging with and understanding each other’s interests and concerns. This has economic benefits for Colombo and has also assisted Delhi in pushing back against China and enhancing its security. However, given China’s economic incentives, the Dissanayake government will be keen to balance ties between its two key neighbours. Despite India and China embracing cautious optimism in their bilateral ties, apprehensions pervade about Chinese activities and presence in the region. And with China and India competing for almost the same sectors in Sri Lanka, the latter will have to carefully balance the two powers. For its part, New Delhi should keep the momentum of its engagement with Colombo intact.

Anura DissanayakeColombogeopliticsgeopoliticsIndia-Sri LankaNarendra ModiSri Lanka-China