Benefits of economic integration between India and Sri Lanka

This paper is authored by Talal Rafi, ORF, New Delhi.

This brief examines the importance of economic integration between India and Sri Lanka in fostering both nations’ growth as well as regional stability. Their deep cultural, historical, and geographic ties support an evolving economic relationship driven by trade, investment, and connectivity. As Sri Lanka’s largest trading partner and investor, India plays a pivotal role in its economic recovery, particularly following Sri Lanka’s recent economic crisis. The brief highlights the mutual benefits of integration: Sri Lanka can access India’s large and expanding market, attract Foreign Direct Investment (FDI), and leverage India’s cost-effective energy solutions. India, for its part, can enhance its regional security, counter rival influences, and strengthen its strategic presence in the Indian Ocean region. Key opportunities include expanding trade agreements, investing in infrastructure and renewable energy ventures, and enhancing maritime connectivity.

Indian Prime Minister Narendra Modi and Sri Lanka President Anura Kumara Dissanayake (AFP)

India and Sri Lanka, neighbouring countries in South Asia, share a unique economic relationship rooted in culture, geography, and history, and which has evolved over the decades. Their economic integration is crucial for both mutual growth and fostering regional cooperation within frameworks like the South Asian Association for Regional Cooperation (SAARC) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

This paper can be accessed here.

This paper is authored by Talal Rafi, ORF, New Delhi.