Wednesday, August 15, 2012

The Politics Of India’s Relationship With Sri Lanka: What India Really Wants

By Kath Noble -August 15, 2012

Kath Noble

While Tamil Nadu is fixated with the politics of India’s relationship with Sri Lanka, as was amply demonstrated by the hullabaloo over the conference of the Tamil Eelam Supporters’ Organisation in Chennai on August 12th, the rest of the country has been focusing on rather different issues.

The August 2nd to 5th visit to Colombo of Union Commerce Minister Anand Sharma brought with it announcements of several major developments on the economic front. He spoke of doubling bilateral trade to $10 billion per year by 2015, plus a considerable increase in investment and the resumption of negotiations on the much-postponed CEPA. Meanwhile, a 20-member delegation of India’s top business leaders were holding talks with their Sri Lankan counterparts, and more than 100 companies were showing off their wares at the India Show organised by the Confederation of Indian Industry at BMICH.

Of course, economics is not apolitical. Indeed, making the Sri Lankan economy more dependent on India has often been suggested by Indian analysts as a means by which New Delhi can acquire greater leverage over the Government.

However, Sri Lanka is already economically vulnerable, with around 60% of its exports going to the West. We have seen the follies of such dependence in the last few years as demand from Western countries has fallen with the Global Financial Crisis and subsequent recession. And during the war, we saw the potential political impact when trade preferences under their GSP schemes came up for renewal – both the European Union and the United States attempted to use the opportunity to push for their preferred policies, never mind what the Sri Lankan public wanted. A more balanced export profile would reduce these problems. Anyway, only 15% of Sri Lankan exports go to Asia, and with the region likely to continue growing faster than Western nations for decades to come, Sri Lanka really ought to be thinking about where it wants its markets to be.