COLOMBO/NEW DELHI: When Sri Lanka slid into its worst economic crisis in seven decades leading to deadly riots and alarming shortages of fuel, food and medicines earlier this year, its giant northern neighbour stepped into the breach.
India provided about $4 billion in rapid assistance between January and July, including credit lines, a currency swap arrangement and deferred import payments, and sent a warship carrying essential drugs for the island’s 22 million people.
Now, as Sri Lanka closes in on a $2.9 billion loan deal from the International Monetary Fund (IMF) and its economy stabilises, India is seeking to land ambitious long-term investments, with an eye on countering the influence of regional rival China, a government minister and three sources said.
“What we are looking at right now is investment from them,” Sri Lankan foreign minister Ali Sabry said in an interview this month, referring to a range of projects worth over $1 billion currently under discussion that would help bolster India’s presence in Sri Lanka. “They’re willing to invest as much as it takes.”
“India is probably strategically looking at that…because of their security concerns,” Sabry said.
India’s foreign ministry did not respond to questions from Reuters on its plans and strategic aims in Sri Lanka.
Regional security would always be a focus for New Delhi, a source with knowledge of the matter told Reuters, at a time of persistent friction with China along their Himalayan frontier.
“There are no two ways about security concerns,” the source said, asking not to be named because of the sensitivity of the issue. “In terms of long-term engagement, it is investment that is being focused on.”
Besides seeking Indian investments to set up renewable energy and power projects in the north of the island, Sri Lanka is also keen to work with New Delhi on expanding and developing the harbour at Trincomalee in the northeast into a major port, several officials said.
Taking advantage of northern Sri Lanka’s proximity to India, these projects could help New Delhi balance China’s extensive infrastructure projects in the south of the island that have been built up over the last 15 years.
Sri Lanka’s Tamil-dominated north also shares ethnic ties with India’s Tamil Nadu.
Concern about China
The talks, and the scale of Indian aid this year that far exceeds other donors, underline New Delhi’s efforts to claw back influence in the island located just a few miles off its southern tip along busy waterways linking Asia to Europe.
In late June, a fortnight before tens of thousands of angry Sri Lankans took to the streets and forced President Gotabaya Rajapaksa to flee the country, India’s top diplomat flew into the island nation’s main city of Colombo for meetings.
Foreign secretary Vinay Kwatra, who was accompanied by officials from India’s finance ministry, met Rajapaksa and Prime Minister Ranil Wickremesinghe, among others. —Agencies
In their conversations with the Sri Lankan leadership, Kwatra and other Indian officials flagged China’s position as a key geopolitical concern, according to a Sri Lankan government source with direct knowledge of the discussions.
The source, who declined to be named because he was not authorised to speak to the press, said China’s huge role in the island’s economy, which had mushroomed under previous Rajapaksa administrations, was troubling India more than anything else.
Details of the June meeting have not previously been reported.
Kwatra and the Indian and Sri Lankan foreign ministries did not respond to questions from Reuters on the June meetings.
In a statement released immediately after Kwatra’s visit, the Indian foreign ministry said that talks had mainly focused on economic issues, including deepening investments. It made no mention of China.
New Delhi has long been concerned about China’s clout in its neighbourhood, including Nepal, Bangladesh and Sri Lanka. Sensitivities have been heightened, and diplomatic relations frayed, since Indian and Chinese troops clashed along a remote Himalayan border in 2020, leaving dozens of soldiers dead.
“We understand that it is their prerogative to look after their security,” Sabry said, referring to India. “And as far as Sri Lanka is concerned, we don’t want to contribute to any escalation of tension between any countries.”
China, meanwhile, has engaged with the Sri Lankan government on debt restructuring that is required for the IMF deal to go through, besides sending shipments of medicine, fuel and rice.
The World Bank estimates Beijing’s lending stands at around $7 billion, or 12% of Sri Lanka’s $63 billion external debt.
“We are willing to work with relevant countries and international financial institutions to continue to play a positive role in helping Sri Lanka,” China’s foreign ministry said in response to written questions from Reuters.
The ministry said it did not have details of India’s assistance and investment in Sri Lanka and that its own support of Sri Lanka was “not targeted at third parties”.

Press Trust of India