THE 2019 SRI LANKAN CRISIS AND ITS SPILLOVER EFFECTS ON INDIA: THE POLITICAL, ECONOMIC, AND SOCIAL DIMENSIONS

The Sri Lankan economic crisis, which escalated dramatically in 2022, marks a pivotal moment in the nation’s history, stemming from a combination of internal mismanagement and external shocks. The crisis is primarily rooted in excessive foreign debt and fiscal mismanagement, particularly following significant tax cuts in 2019 that drastically reduced government revenue. This led to soaring budget deficits as the value-added tax was cut to 8% and corporate tax was reduced from 28% to 24%. Consequently, the Central Bank resorted to printing money, resulting in inflation and currency devaluation. Additionally, poor agricultural policies, notably an abrupt shift to organic farming that banned chemical fertilizers, caused widespread crop failures and increased reliance on food imports. The COVID-19 pandemic further strained the economy by devastating the tourism sector, a crucial source of foreign currency. Coupled with geopolitical tensions from the Russia-Ukraine war, these factors culminated in Sri Lanka declaring its first-ever sovereign default in April 2022. The ensuing economic turmoil sparked widespread protests, leading to significant political changes, including the resignation of President Gotabaya Rajapaksa. In response to the crisis, Sri Lanka sought international assistance, securing a $2.9 billion bailout from the IMF in early 2023. The socioeconomic impact has been severe, with poverty rates surging and challenges for micro, small, and medium enterprises exacerbated by reduced consumer spending power. The purpose of this study is to analyse the 2019 Sri Lankan economic crisis and its repercussions on India from a political, economic, and social standpoint. It aims to comprehend how trade, investment, and regional economic dynamics in India were impacted by Sri Lanka’s financial instability. The study also looks at the political ramifications, such as diplomatic reactions and changes in Indo-Sri Lankan relations strategy. Social effects, such as migratory patterns and labour market disturbances, are also investigated. This study intends to emphasise the larger regional ramifications of Sri Lanka’s crisis and provide insights into India’s policy actions and future initiatives by conducting a thorough examination