India stepping up efforts
TWO of India’s neighbours, Sri Lanka and Pakistan, are confronting serious economic problems which would require substantial foreign assistance. At the same time, what is heartening is that Bangladesh, which has been celebrating the 50th anniversary of its liberation, has emerged as the fastest growing economy in South Asia. It is internationally recognised as being among the world’s fastest growing economies, with an estimated growth rate of 7.5%. The driving force behind its rapid growth has been the expansion of its garments industry. Textile exports now account for 80% of the country’s total export earnings.
South Asian countries face serious challenges posed by Covid. India should work out strategies for the supply and distribution of vaccines to its needy neighbours.
Recent years have also seen continuing expansion in industries like natural gas, pharmaceuticals, steel and food processing, together with a steady increase in foreign investments in these sectors. Bangladesh has also agreed to extend a currency swap facility of $200 million to Sri Lanka. The last BIMSTEC Summit was held in Colombo on March 30. While ambitious programmes have emerged for regional connectivity, financing of projects may likely remain problematical. But expanding regional and bilateral cooperation across the Bay of Bengal, remains an important priority to be addressed, amidst the growing Chinese influence and presence in the region.
Sri Lanka has been hit hard by a series of problems, including a loss of tourist revenue following Covid. There has also been a drastic fall in remittances from its citizens working in the Gulf. Many Sri Lankans, however, assert that their problems have arisen because of errors of omission and commission of its ruling elite, including President Gotabaya Rajapaksa and his brother, PM Mahinda Rajapaksa. The government has run into further trouble by its ban on chemical fertilisers in 2021. This led to a substantial fall in agricultural production. It exacerbated countrywide protests, alleging mismanagement of the economy. There are, meanwhile, concerns that a cash-strapped Sri Lanka could be influenced in future to provide military bases to China in the Hambantota Port, built with Chinese assistance.
India has moved with Japan to ensure that China does not have exclusive control of the Colombo Port, through which significant amounts of India’s trade is moved. In a 35-year agreement signed recently, India’s Adani Group will have a 51% stake in the expansion of the port, together with the Sri Lanka Port Authority. The project will be backed by Japanese funding. The project is located virtually next to the China-backed Colombo International Container Terminal. An estimated 75% of the traffic in the port is made up of goods to or from India. Even as Sri Lanka was commencing negotiations with the IMF for a long-term arrangement, Finance Minister Nirmala Seetharaman made an impassioned call in Washington DC for expeditious provision of funds for Sri Lanka. The IMF has since announced that it has held ‘fruitful technical discussions’ with Sri Lanka.
According to sources in Colombo, these activities have been facilitated by the manner in which India has joined the Sri Lankan Government by participating in and financing the Herculean relief effort in Sri Lanka. The Export Import Bank of India and the Government of Sri Lanka signed a $500 million Line of Credit Agreement for the purchase of petroleum products in February. Under this agreement, 10 consignments of fuel totalling 4 lakh tonnes have been supplied so far. In response to a separate and urgent request from Sri Lanka, extension of credit facilities for $1 billion, for supply of essential items like food and medicine, has been finalised. The first shipment of rice under this facility has reached Sri Lanka. In January, India provided financial assistance which included a currency swap of $400 million, deferment of Asian Clearing Union payments of $515 million, and again of $498.9 million. In cumulative terms, Indian support to Sri Lanka in the first quarter of 2022 has been in the range of $3 billion.
Ties with Sri Lanka are naturally linked to peace and security across the Bay of Bengal. It is gratifying that relations with India’s eastern neighbours Myanmar and Bangladesh remain on a firm footing. India shares an insurgency-prone 1,640 km with Myanmar. Given the sensitivity of the border and Myanmar’s proximity to China, India maintains close relations with Myanmar’s military government. This serves us well to deal with cross-border armed insurgent groups, whose members cross into China’s Yunnan province. India also provides Myanmar with assistance to develop border roads and ports.
Relations with Pakistan remain marked by separatist insurgencies, primarily in J&K. There have been periods when Pakistan has limited its backing to terrorism. It remains to be seen if this is sustained after army chief General Bajwa demits office in October. The new PM Shehbaz Sharif attaches the highest importance to Pakistan’s economic progress and may not be averse to trade, economic and people-to-people exchanges with India. It, however, remains to be seen if he will stay in office till the general election next year. The challenges that Imran Khan can, and will, provide should not be underestimated.
All South Asian countries now face serious problems in meeting challenges posed by Covid. This is set to continue indefinitely. India would serve its neighbours best if it works out strategies for the supply and distribution of vaccines to its needy neighbours. Pakistan’s Planning Minister Ahsan Iqbal wisely noted that for Pakistan to be strong it must ‘align itself with the global economy, not isolate itself’. One looks forward to seeing whether Sharif follows this wise advice in the conduct of relations with India.
