Economic crisis in Sri Lanka: Lessons from 1991 India

 Today, Sri Lanka is passing through a difficult time due to the severe economic crisis, manifested through chronological events starting since independence but more recently the 2019 Easter blasts, unwise tax reduction, and COVID-19 pandemic have multiplied the crisis.

by Dr Bhabani Sonowal 

It was a time when India was struggling to recuperate from one of the darkest periods in its economy; the unemployment rate was on the rise, prices of essentials were skyrocketing, and depression among the public widened. Consequently, people had been left with no option but to take their desperations to the streets and express their emotions against the ruling administration. Unprecedented challenges were looming. But, on the other side, serious likeminded intelligent minds had already started working around the clock to find solutions to mitigate the impact of national calamity. Their profound commitments and dedications structurally transformed India. 

It was the height of the Gulf War and the collapse of the USSR, India’s top diplomatic collaborator which enabled bilateral trade in local currency. On the other hand, the power of Prime Minister P.V. Narasimha Rao, the successor of Rajiv Gandhi, was challenged by political instability. But, Rao, despite all hurdles, seized the opportunity and deployed correct and unspoiled economic enablers in place by giving them the freedom to think and demonstrate their duties. He was honest about the subject he did not know so much but his political wisdom enlightened him to choose the right person at the right moment. “I don’t understand economics… Pranab and you have to explain,” he once told Jairam Ramesh and Pranab Mukherjee during the peak of the economic crisis.  

Today, Sri Lanka is passing through a difficult time due to the severe economic crisis, manifested through chronological events starting since independence but more recently the 2019 Easter blasts, unwise tax reduction, and COVID-19 pandemic have multiplied the crisis. A series of events contributed to the depletion of the foreign exchange beyond recovery due to which imports of essentials were restricted tremendously resulting in the worst economic crisis in the island nation. 

Click here to read the rest of this article originally published in the Financial Times