WHAT’S IN NEWS:
As Sri Lanka begin talks with International Monetary Fund (IMF) to initiate bail-out proceedings in consonance with the ongoing economic breakdown there are important lessons for India, to learn from their neighbour to prevent similar future crises.
1. Bail-out: An act of giving financial assistance to a falling business or economy to save it from collapse.
2. Ethno-Nationalism: Advocacy or support for the political interest of a particular ethnic group, rather them of a nation.
SRI LANKAN CONTEXT and INDIAN SCENARIO:
1. Sri Lanka – Sri Lanka’s woes are economic on the surface but stem from the social strife, that have been exacerbated by majoritarian and identity politics driven by the ethno-nationalistic stance of the state.
India – The government’s inability to even restore, let alone raise the investment rate in India is partly related to socio-economic tension, strive between centre and states and antagonism between religious communities. The exit of some high net worth Indians from the country and outflow of FDI are example of this.
2. Sri Lanka – In Sri Lanka distribution of economic resources in the wake of welfare spending stems to have run ahead of what could be guaranteed from domestic source leading to huge debts and economic fall-down.
India – As India’s economy has grown, many of the states have stepped up their welfare spending. While no form of welfare need to be precluded in principle, the public finances are subject to an accounting constraints. When revenue are limited welfare spending crowds out spending on economic productive capacity which includes schools, hospitals and infrastructure.
3. Sri Lanka – Sri Lanka’s case shows why it can be damaging for a country to rely on trade for its essential consumption goods.
India – By comparison, the states of India that faces deficit of food are saved by being part of the Indian union, Kerala being the prime example of this arrangement.
CONCLUSION:
Sri Lanka’s first task would be to urgently revive its food producing sectors. As of India, it must learn from its neighbour’s misfortune and step up domestic production across sectors from oil seeds to renewable energy and defence equipment. Also, India needs to make sure that they are not helping Sri Lanka as a political lifeline to Sinhala-Buddhist Rajapakasa family but as a good neighbour to mitigate the crises of people at large.
