INDIA’S POLITICAL ECONOMY: CHALLENGES AND OPPORTUNITIES FOR SRI LANKA

Abstract

India's economy became the world's fastest growing major economy from the last quarter of 2014 replacing the People's Republic of China (DNA, 2015), a title which was held by China for more than three decades. India represents the second largest market in the world with a population of more than 1.2 billion people, which is nearly one fifth of the global population. India?s economy is the seventh-largest economy in the world measured by nominal GDP and the third-largest by purchasing power parity (PPP) (International Monetary Fund, 2015). In this background India is focusing heavily on becoming a future global super power and further strengthening its regional hegemony in the South Asian region as it contains all the necessary elements for that. Throughout the history India has been the most important external factor that influenced the political stability of Sri Lanka due to its massive size and close proximity. The recent growth of India?s Political Economy has both provided challenges and opportunities to Sri Lanka for its future economic growth and political stability. The already signed Indo-Sri Lanka Free Trade Agreement has provided a boost in trade, but in favour of India. The proposed bridge/tunnel, energy grid among the two countries and proposed Indo-Sri Lanka Economic and Technology Cooperation Framework Agreement (ECTA) are some of the proposed initiatives among the two countries. The research problem of the study is to examine the proposed economic development initiatives among the two countries and analyse the implications of these projects on Sri Lanka. Also the study will focus on identifying the importance of present and future of Indian Political Economy and will propose a hypothesis to gain opportunities while facing the challenges of dealing with a giant regional hegemony.