India to provide $318 million line of credit to Sri Lanka

India signed an agreement with Sri Lanka on 6 June 2017 to provide fresh assistance of USD 318 million as a line of credit for the development of the nation’s railway sector.

The agreement was signed by RHS Samaratunga, Secretary, Ministry of Finance and Mass Media and David Rasquinha, Managing Director of India's Export-Import Bank in Colombo.

India has previously provided four lines of credit to Sri Lanka to develop its railway sector, amounting to approximately USD 966 million. These credit facilities were utilised to improve the country’s Southern and Northern railway lines and for the procurement of rolling stocks.

According to Sri Lanka's Ministry of Transport, improving passenger transportation facilities is urgently required to attract passengers towards railways, which is a cost-effective mode of transportation.

Background

• The credit line was declared by Narendra Modi during his first visit to Sri Lanka as the Prime Minister of India in 2015.

• The visit, which was the first standalone bilateral visit by an Indian prime minister since 1987, had come in the backdrop of increasing Chinese presence in the nation.

• China has been investing heavily in Sri Lanka, developing mainly ports that could potentially be used as a base for its navy.

• China, however, claims that the investments are part of its Belt and Road Initiative that aims to link it with Europe and Africa through the Indian Ocean.

• India has been Sri Lanka's major development partner in the South Asian region for over 40 years.

• Over the past years, Indian foreign direct investment in Sri Lanka has expanded considerably.

Presently, Indian development assistance mainly focuses on improvement of infrastructure, livelihood development, education, healthcare, and capacity building.