Context:

• This article is based on an Editorial “Re-setting Indo-Lankan ties” which was published in the Financial Express. China is growing its influence in South Asia and it has become an important and strategic objective of the US and India to counter China’s growing influence in the region.

About the Colombo West International Terminal (CWIT):

• Financed by: The financing of $553 million by the US International Development Finance Corporation to develop the Colombo West International Terminal (CWIT). 
• Development Deal: This project pertains to a $700-million deal signed in 2021 between Adani Ports and SEZ and Sri Lanka Ports Authority and Sri Lankan conglomerate John Keells Holdings to jointly develop the shipping container terminal. 

Role of India in Sri Lanka’s Development: 

• India’s FDI: India’s investments amounted to $5.9 billion or 2% of its total from April 2000 to March 2023, while Sri Lanka’s FDI into India was only a paltry $96 million over this period. 
• Job Generation: Since the funding in CWIT is for a project consortium led by an Indian entity, the investment considerably enhances India’s role in developing Sri Lanka, as it will have huge multiplier effects in generating thousands of jobs. 
  • Investment: The Adani Group has also indicated its intent to invest $750 million to set up a 500-MW wind farm.  
• Trade and Integration: By investing in each other’s economies grows, there would be greater two-way trade flows and closer integration. 
  • As the Sri Lankan government seeks to divest its stake in state-owned enterprises, several Indian corporates have expressed their interest too.
• Connectivity: Both nations adopted a vision document for promoting greater connectivity. 
  • India’s involvement in CWIT exemplifies closer cooperation in ports and logistics infrastructure. 
  • Direct flights between Chennai and Jaffna have improved air connectivity options for the Tamil population in the island nation’s northern region. 
  • A ferry service between Nagapattinam in India and Kankesanthurai in Sri Lanka has also been launched. 
• Renewable Energy: India’s investments in wind energy help in developing Sri Lanka’s significant renewable energy potential. 

The Path Ahead:

• More Investment: Greater mutual investments can be strengthened by policy consistency, greater ease of doing business, and fair treatment of each other’s investors. 
• More Cooperation: Talks have also been revived over a more ambitious Economic and Technical Cooperation Agreement which includes trade in services, including the movement of professionals. 
• Trust Building: Settlement of trade in rupees helps, but the perception that investment-driven freer trade with the dominant partner is not against Sri Lanka’s interests must be created. 
• Closer Integration: At a time, when Sri Lanka has expressed interest in joining the Regional Comprehensive Economic Partnership, closer integration is bound to raise its stakes in India’s rapid growth.

Conclusion:

High investments are important to further the process of regional integration and ensure neighbors like Sri Lanka have a greater stake in the India growth story.