Sri Lanka (GDP Per Capita $4,013) Has Nothing to Gain from India(GDP Per Capita $2,256)
Posted on February 13th, 2024

Dilrook Kannangara

Despite years of economic downturn, Sri Lanka is 77% more developed than India economically as can be seen from the two countries’ nominal GDP per capita. India is a large world economy only due to the sheer size of its poor population. For instance, a family of 15 in Bangladesh would have a larger rice pot than a family of 4 in Japan. But that does not mean Bangladesh is more developed than Japan. When individual portion sizes are compared a Bangladeshi would only have a fraction of what a Japanese individual would have. Mixing up these two is unwise. Any closer economic tie-up with India will lead to comparatively richer Sri Lanka losing economic resources and opportunities to comparatively poorer India.

Sri Lanka’s exports to India is around $1 billion but Indian exports to Sri Lanka is over 4 times that! In other words, although Sri Lanka has an economic opportunity for India to exploit, the converse is not true (India is no economic opportunity for Sri Lanka). In fact, India is an economic burden as Sri Lankan industries, professionals and services will be out-bidden by cheap and desperate Indian companies, professionals and service providers. The very large (77%) GDP per capita gap is the reason.

Indian tourists are the largest Sri Lanka gets but this is misleading. Most Indians arriving in Sri Lanka are not genuine tourists. Most come to Sri Lanka to work, trade, earn and repatriate their local earnings converted to US dollars back to India. This is a bane on the island nation’s dollar reserves. Some other Indian travelers take out gold and gem stones illegally from Sri Lanka which is also a huge drain on Sri Lanka’s foreign reserves. This is well known. Passenger terminals for outbound Indian passengers are thoroughly checked for smuggled gold. With ferry service between the two nations starting soon, the amount of gold and gem stones smuggled out of Sri Lanka will increase which will worsen Sri Lanka’s foreign currency crisis, debt crisis and economic crisis.

Indian investments in Sri Lanka have not added any value to the Sri Lankan economy. Instead, Indian investments have reduced value of local industries. A case in point is the Indian Oil Company. Instead of investing in a local refinery, IOC operates profitable fuel distribution which is also done by locals. We don’t need Indian investments to open up petrol sheds and transport systems. All profit, management charges, purchase price margins, senior management salaries are repatriated to India. Sri Lanka loses it in dollars. Indian investments are not needed in dairy industry. India produces a large quantity of milk due to its near-slavery labour conditions backed by caste discrimination (very low salaries), vast grasslands (Sri Lanka has a higher population density than India and lower shanty dwellers as a percentage) and the large Indian local market. Sri Lanka has none of these economies of scale and Sri Lanka needs the New Zealand model (not their cows) for dairy industry. By allowing Indian milk companies to invest in Sri Lanka, the island nation will lose large swaths of productive land to Indians, lose the dairy industry to Indians and will never produce sufficient quantities of milk for locals.

Despite opening its economy in 1977 Sri Lanka did not sign a genuine Free Trade Agreement with India until 1998 when it was imposed on the island nation. That marked the beginning of economic downturn. In 2001 Sri Lanka recorded a negative economic growth rate after rapid decline in economic growth rate since 1998. Trade between the two countries peaked in the late 2010s leading to rapid economic collapse of the Sri Lankan economy.

Conversely, Sri Lankan economy did very well when it shunned India and these golden years include 1977 to 1997 despite the war (India sponsored anti-Sri Lanka Tamil terrorists) and an insurrection.

The Indian Decade” was from 2010 to 2019 when the Indian economic growth rate was the highest in the world. However, since then it has fallen and India is desperately looking to export its poverty, unemployment (especially skilled unemployment), environmentally disastrous industries, exploitative labour practices and other nasties. All regional countries have rejected India for this reason (Maldives is the latest)! Sri Lanka is digging its own grave by cultivating closer economic ties with India.

The large Indian market is useless for Sri Lanka as Indians can source almost everything they need from Sri Lanka from within India and through smuggling.

Hoping India would help Sri Lanka develop its IT sector is rather foolish. India will never do it as the IT sector is the highest dollar earning sector of India. Instead, India will guard it as desperately as possible and destroy Sri Lankan IT companies to avoid competition. Any Indian IT work that will be outsourced to Sri Lanka will be fraud (call) centres and counterfeit centres. Indian fraud call centres and counterfeit centres are responsible for most scams in the developed world and India is under pressure to discontinue it. But the total industry is worth $200 billion a year and India will not abandon the hen that lays golden eggs. Instead, India will pass these to Sri Lanka! Ultimately Sri Lanka will be censured for fraud while India earns all the dollars.

Nothing good ever came or will ever come from India to Sri Lanka. (For the record the Asokan Empire was not India as it excluded Tamil Nadu which was conducive for antient Lankans to embrace it. Humans originated in Africa and not India.)

Closer economic, political, geopolitical and social ties with India are political gimmicks played by local bankrupt politicians to appease India at the expense of the Sri Lankan national economy. Such closer ties with India bring only economic destruction, poverty and hopelessness.

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