The economy was undoubtedly the central issue in Sri Lanka’s presidential election on Sept. 21—unlike in past votes, when ethnic divides between the Sinhala Buddhist majority and the Tamil minority played a more prominent role. Two years ago, Sri Lanka plunged into an unprecedented fiscal crisis driven by the COVID-19 pandemic—which decimated tourism, a major source of the country’s revenue—and economic mismanagement by then-President Gotabaya Rajapaksa, who resigned in July 2022.
Sri Lanka’s interim president, Ranil Wickremesinghe, tamed inflation and restored some economic growth while agreeing to an International Monetary Fund deal that came with substantial austerity measures. However, Wickremesinghe’s association with the political elite that presided over the 2022 crisis hurt him in the polls, where he came in a distant third among the main contenders. Anura Kumara Dissanayake, the Marxist-leaning leader of the Janatha Vimukthi Peramuna (JVP) party, emerged as the winner on Saturday.
The economy was undoubtedly the central issue in Sri Lanka’s presidential election on Sept. 21—unlike in past votes, when ethnic divides between the Sinhala Buddhist majority and the Tamil minority played a more prominent role. Two years ago, Sri Lanka plunged into an unprecedented fiscal crisis driven by the COVID-19 pandemic—which decimated tourism, a major source of the country’s revenue—and economic mismanagement by then-President Gotabaya Rajapaksa, who resigned in July 2022.
Sri Lanka’s interim president, Ranil Wickremesinghe, tamed inflation and restored some economic growth while agreeing to an International Monetary Fund deal that came with substantial austerity measures. However, Wickremesinghe’s association with the political elite that presided over the 2022 crisis hurt him in the polls, where he came in a distant third among the main contenders. Anura Kumara Dissanayake, the Marxist-leaning leader of the Janatha Vimukthi Peramuna (JVP) party, emerged as the winner on Saturday.
Dissanayake’s victory marks another political shift in India’s neighborhood, and his party has a history with New Delhi. The JVP—founded as a revolutionary movement—was involved in two violent insurrections in Sri Lanka, both of which failed: first in 1971 and again from 1987 to 1989. India helped suppress the first uprising, leading the JVP to see New Delhi as a domineering force in the region. By the late 1980s, the party had become a Sinhala-nationalist organization, which put it at odds with India and its substantial Tamil minority population.
In the last year, Dissanayake sought to reach out to India—his past reservations aside—and expressed admiration for some of New Delhi’s economic policy successes. Indian National Security Advisor Ajit Doval also met with Dissanayake on a recent trip to Sri Lanka. India should find Sri Lanka’s new president to be a pragmatic partner: The JVP recognizes that it must come to terms with New Delhi. And despite misgivings in India, and especially in the southern state of Tamil Nadu (home to an estimated 80 million Tamils), the JVP government will have a relatively limited impact on India-Sri Lankan relations in the near term due to a few structural factors.
First, the new government can’t afford to treat Sri Lankan Tamils fecklessly and risk provoking India, which could lead it to deny economic assistance that Sri Lanka still needs. India is Sri Lanka’s second-largest trading partner, closely behind China, and Sri Lanka is acutely dependent on India for refined petroleum. The government in Colombo is in no position to quickly switch to another supplier, regardless of its sentiments toward New Delhi. Furthermore, Sri Lanka’s leaders—no matter their ideological orientation—cannot ignore India’s the extraordinary $4 billion worth of assistance provided by India during the dire economic crisis two years ago.
However, China has also made significant inroads in the past decade in Sri Lanka; Colombo owes nearly 11 percent of its $51 billion external debt to Beijing. Unable to maintain its interest payments on a Chinese-built port in the city of Hambantota, the Sri Lankan government was forced to grant Beijing a 99-year lease in 2019. Given these competing forces, the new government must maintain good relations with India without rebuffing China. It is not yet clear whether Dissanayake will cozy up to Beijing, but ties with New Delhi have taken on added significance now that it has demonstrated that it can provide an economic lifeline when most needed.
In turn, how is India likely to react and deal with the new government in Colombo? At the outset, New Delhi will probably focus on three key issues. First, given the JVP’s past, it is likely to remain vigilant about any resurgence of virulent Sinhala nationalism. India’s Bharatiya Janata Party, which took a bit of a battering in this year’s national election and now rules in coalition, is likely to be especially sensitive about sentiments of the population of Tamil Nadu, where the regional Dravida Munnetra Kazhagam party holds sway.
Second, and relatedly, India is likely to keep an eye on whether the new government makes any effort to implement the Sri Lankan Constitution 13th Amendment, which promised to devolve power to the Tamil minority—a move that New Delhi would support. Of the three leading presidential candidates, only Wickremesinghe pledged during the campaign that he was committed to fully implementing it. Given his predominantly Sinhala political base, Dissanayake avoided bringing up the issue.
Third, New Delhi will watch how the JVP government handles its ties with Beijing. India is increasingly anxious about the growing Chinese footprint across South Asia and especially in Sri Lanka; its economic resources cannot match those of China. New Delhi is likely to remind Colombo that Beijing did little to bail it out in 2022. More to the point, for any grievances that Sri Lanka may harbor about India, the regional power has not locked Colombo in the vise of a debt trap.
India, too, has incentives not to alienate Dissanayake’s government. Its ties with Nepal are uneven, it has lost an ally in Bangladesh since Prime Minister Sheikh Hasina stepped down under pressure last month, and it has reached an impasse in relations with Pakistan. New Delhi cannot afford to see new tensions emerge with its island neighbor. Fortunately, India’s outreach to Dissanayake ahead of the election should ward off such an outcome.
India-Sri Lanka relations have seen their share of vicissitudes since the end of British colonial rule in Sri Lanka (then Ceylon) in 1948. But neither country can escape the inexorable role of geography and the ethnic links that exist across the Palk Strait. From its standpoint, India must deal with China’s vast material capabilities and influence in Sri Lanka. As a result, it will follow the political choices that Dissanayake’s government makes in the weeks and months ahead with considerable attention.
The new government in Colombo will have to cope with a set of unenviable challenges, from persistent economic woes to long-standing ethnic rifts—as well as negotiating a viable pathway between two great powers.
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