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Debt ridden Sri Lanka knocks on India’s door for help in eight sectors

All eyes on Sri Lanka as it battles an acute economic crisis

Amid an acute financial crisis Sri Lanka is looking to enhance economic cooperation with India and woo investors to stabilize its situation. The focus will be particularly on eight sectors– energy, refineries, electricity grid, ports, real estate, tourism and Information and Communications Technology. Sri Lanka’s envoy to India Milinda Moragoda said in an interview to the Economic Times.

"India is the biggest economy in the region and Lanka wants to benefit from the Indian growth story," he said. "Lanka can be a springboard for the Indian investors in the region. Our idea is to integrate our economy into the Indian economy for a win-win situation," the news organization quoted Moragoda as saying.

Besides being the second largest trading partner of Sri Lanka, India is also one of the largest contributors to foreign direct investment into the island nation. A number of leading companies from India have invested and established their presence in Sri Lanka. FDI from India amounted to about $ 1.7 billion between 2005 and 2019. The main investments from India are in the areas of petroleum retail, tourism & hotel, manufacturing, real estate, telecommunication, banking and financial services.

Also read: Sri Lanka averts international loan default but citizens are not happy

Earlier this month, Sri Lanka’s Cabinet gave its approval to India for jointly developing the World War II era Trincomalee oil tank farm. The deal will greatly help India gain strategically. Importantly, it will also help India balance China’s presence in the island nation.

This oil farm facility built by the British as a refuelling station, has a storage capacity of about 1 million tonnes, which is significantly higher than Sri Lanka’s demand.

Under this fresh agreement, Lanka IOC, the subsidiary of Indian Oil will have 49 per cent stake in the joint development of the oil farm while the remaining 51 per cent stake will remain with Ceylon Petroleum Corporation.

Sri Lankan economy is currently facing the twin challenge of fast eroding foreign exchange reserves and surging inflation. Sri Lanka’s President Gotabaya Rajapaksa declared a state of economic emergency in September last year.