India, Sri Lanka relations: implications of Modi’s victory

The outcome of LokSabha (lower house of the Indian Parliament) elections on May 16th was unexpected and unprecedented over the last three decades. The trend towards more fractured and fragmented outcomes has been reversed decisively. The third benefit for Sri Lanka from a Modi government will emerge from India reverting back to a high growth path. Mr Modi is committed to removing India’s twin governance and infrastructure (including education and health) deficits. This will re-ignite the investment cycle pushing economic growth in India back to the high single digits. Higher economic growth in India has multifaceted benefits for Sri Lanka, whose exporters will find new demand; investors will find newer opportunities; and Indian tourists will flock to Sri Lanka in increasing numbers. An expanding Indian economy will hopefully take away the fears and insecurities of those in Sri Lanka who apprehend a rush of investments and exports from India. These investors will have their hands full in meeting the domestic demand and perhaps absorb more Sri Lankan investments and exports than the other way round. Thus, the long hanging Comprehensive Economic Cooperation Agreement between the two countries could finally be finalised.

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