The two ways India can help Sri Lanka are through plantation and tourism: Sri Lanka’s primary source of income.
However, the Indian economy is a target of the rising Russia-Ukraine crisis, the removal of PM Imran Khan, and border troubles with China.
Furthermore, the demonetization in 2016 slowed down India’s economic growth.
Nevertheless, while solutions for India are long-term, India has found ways to help Sri Lanka amidst the geopolitical crises.
Additionally, India offered $1 billion to Sri Lanka as a credit line and supplied 270,000 tonnes of fuel.
How can India help Sri Lanka amidst a geopolitical crisis?
Plantation and tourism are vital sources of income for Sri Lanka.
Therefore, India’s role in the revival of Sri Lanka is imperative as it can provide income support for tourism.
Furthermore, India and Sri Lanka must work out a system to secure the tourism supply chain for hassle-free tourism.
This can be achieved by supplying food for large and SME-level hospitality sectors.
While this step does not ensure complete security, it is the first step in the revival of the Sri Lankan economy.
In August 2020, three McKinsey partners strongly advocated a government role in reviving the institutional structures in tourism:
“Reopening tourism-related businesses and managing their recovery in a safe, attractive way for tourists, and economically viable will require coordination at a level not seen before.”
“The public sector may be best placed to oversee this process in the context of the fragmented SME ecosystem, large state-owned enterprises controlling entry points, and the increasing impact of health-related agencies.”
“As borders start reopening and interest in leisure rebounds in some regions, governments could take the opportunity to rethink their role within tourism, thereby potentially both assisting in the sector’s recovery and strengthening it in the long term.”
Who will bear the responsibility for medium-term risk?
While financial re-engineering is another way India can help Sri Lanka, revenue flows are unpredictable.
To not burden one country with financial risks, India and Sri Lanka must develop solutions to reduce the impact of hazards.
Furthermore, financial institutions owned by the Indian government could provide financing.
India can provide financing through Financial institutions such as National Investment and Infrastructure Fund or India Infrastructure Finance Co. Ltd.
Since tourism is a primary source of income in Sri Lanka, Indian tourists spending rupees in Sri Lanka can help in risk mitigation.
Additionally, securing future returns from tourism is another way to help in risk mitigation.
Securing assets in tourism apply in four categories – future revenue cash flows and project finance, vacation ownership receivables, and mortgage loans.
Given the current Sri Lankan crisis amidst rising geopolitical tension, it will require immediate support from friendly neighbors.
While India has offered a $1 billion credit line to Sri Lanka, India must find more ways to help Sri Lanka amidst the geopolitical crisis.
Also Read – India offers $1 billion credit line to Sri Lanka