Engaging Sri Lanka is the best way forward for India

By Hari Narayan

The Hindu: Buddhist monks getting attacked in Chennai; film personalities and college students going on strike; SriLankan Airlines reducing its flights to Chennai by half; uncertainty over IPL matches in Chennai between teams that will have Sri Lankan cricketers — Tamil Nadu is in ferment over Sri Lanka’s treatment of the island’s Tamil minority. Some, including the ruling AIADMK, even speak of economic sanctions against Sri Lanka.

But before even thinking about that, it would be instructive to see how closely linked the economies of the two countries are, and how Tamil Nadu will be no less hurt than Sri Lanka.

India is Sri Lanka’s leading trade partner globally; Sri Lanka is India’s major trading partner in the South Asian Association for Regional Cooperation (SAARC) region. The relationship has improved steadily after the signing of the Free Trade Agreement (FTA) in March 2000.

According to Sri Lankan statistics, the trade in 2011 reached $ 4.85 billion — Indian exports standing at $ 4.3 billion, with petroleum oils constituting nearly 21% of total Indian exports and cane or beet sugar coming second at 7.6%; cars at 6.9% and transport vehicles at 5.9%, being the other major categories.

Major Indian investments are all in infrastructure and job-creating industries like hospitals, telecommunication, hospitality and banking. Indian organisations like Indian Oil Corporation; Tatas; Bharti Airtel; Piramal Glass and LIC are some companies present there.

In transport vehicles, Lanka Ashok Leyland — a joint venture between Lanka Leyland and India Ashok Leyland — has its major manufacturing plant in Chennai. Having put onto Lankan roads 42,000 trucks since getting established in 1982, its market share has grown from 13% two decades ago to about 60% at present.

Our country was the second-largest Foreign Direct Investment (FDI) contributor to Sri Lanka in 2011, contributing $ 147 million out of the $ 1.05 billion investment.

Airtel Lanka, which started services in January 2009 when the conflict was at its peak, has grown to become the fastest operator to reach the one million customer milestone in the country. Since then, it has expanded its presence to 1,500+ base stations across the country, including Northern Sri Lanka. Airtel broadband was made available in Jaffna in August 2011.

Lanka IOC is the only private oil company other than the state-owned Ceylon Petroleum Corporation (CPC) operating retail petrol/diesel stations in Sri Lanka and is ranked No. 1 among the island nation’s leading listed companies.

Nearly 40% of all trade with Sri Lanka takes place through Tamil Nadu, involving thousands of people in the state. The informal trade through the State is estimated to be nearly double the formal one.

Speaking to The Hindu, Somi Hazari, Secretary, India-Asean Sri Lanka chamber of commerce said that Tamil Nadu was the State that stood to lose the most if trade ties were severed between the two nations. He said the lives of sugarcane farmers in Tamil Nadu, Trichy in particular, were sustained by sales in Sri Lanka. This apart, mixers grinders and other electronic appliances were a major attraction in Sri Lanka, mostly coming from Coimbatore. The Tea estate workers in Sri Lanka were mostly of Indian origin.

Future plans

Taking the bilateral cooperation in the area of capacity building further, the Indian External Affairs Minister Salman Khursheed had in January, in a joint statement in New Delhi with his visiting Sri Lankan counterpart Professor G.L. Peiris, set a target of doubling trade to $ 10 billion in three years.

Khursheed also said that India was in the process of setting up a special economic zone in Trincomalee, and a pharmaceutical and a textiles cluster elsewhere. He also announced India’s “readiness” to support its neighbour’s endeavour in Science and Technology, education and, health and energy.

This apart, India is also carrying-out negotiations on the Comprehensive Economic Partnership Agreement with Sri Lanka since February 2004 and thirteen rounds have taken place so far. Agreement on this is expected to be achieved in the near future.

When one considers people of Indian origin in the country, apart from Indian-origin Tamils — about 8, 40,000 in number — people of Indian Origin in Sri Lanka also include Sindhis, Borahs, Gujratis, Parsis engaged in various business ventures. They totally number about 10,000 and happen to be among the economically prosperous lot.

Also, India is a major contributor to Sri Lanka’s tourism industry. Indian tourists – 176,340 in number – made up nearly 18% of the total tourists visiting the island nation in 2010. Sri Lankans also visit India in large numbers, for pilgrimages to Bodh Gaya, Tirupati, Sai Baba’s Ashram at Puttaparti, Velankani Church and temples in Tamil Nadu.

Need for delinking

We need to ‘delink’ the political and the people-to-people and economic aspects of our relations with Sri Lanka. Indeed, with more engagement, India is likely to have more leverage with Sri Lanka to make it embark seriously on ethnic reconciliation. This was the method that India used in Myanmar.

Former MEA official Rajiv Sikri pointed out it his book ‘Challenges and Strategy; that though the island nation, as a small neighbour, suffers insecurities, India is not perceived there as the ‘bogeyman’ that it is for the other neighbours. This places India in the best position to guide our neighbour.