Dr Nishant A.Irudayadason
Professor of Philosophy and Ethics, Jnana-Deepa Vidyapeeth, Pune

The cost of living has been constantly increasing in recent months. Practically all essential commodities including petrol and gas have been increasing. While the ruling dispensation is likely to relate this to the war in Ukraine, there are several reasons for this dizzying increase in the cost of living. Economists will tell us that the depreciation of the Rupee, the decrease in our FOREX reserves which stops our ability to temper inflation, increase in our level of debt that becomes too important to have production capacities, our over dependence on imports that exposes us to the risks of global disruptions, and our trade balance which is in deficit are the indicators that show that our economy is in an extremely sensitive situation.
The tools and concepts of economics may sometimes seem abstract and meaningless, but they reflect a very real social reality that is being experienced violently by a growing number of Indians. Our country has been on the downward slope for a long time now, and the global crisis caused by COVID-19 is only accelerating a trend that was already present. But why this downward trend? Let us do a small comparative exercise by taking a look at what has been happening for a decade in Sri Lanka.
Sri Lanka has been caught in a spiral of over-indebtedness for at least 15 years. The latter has reached the 110% of GDP mark this year, and continues to climb. At the same time, the Sri Lankan Rupee is constantly depreciating, and the country’s FOREX reserves are steadily decreasing due to too much dependence on imports. Covid-19 has also hit the country hard, and the tourism sector in particular, added nothing to national revenues. The government’s response to these problems was to increase the country’s indebtedness so that it would stay afloat. After tough negotiations with the International Monetary Fund (IMF), the Sri Lankan government finally turned to other partners – including China – in order to borrow at preferential rates.
In the early 2010s, the Chinese government financed the construction of the port of Hambantota – the second largest port in the country after Colombo. The debt for the construction of this port was so large that the government had no choice but to cede the management of the port to the Chinese for a period of 99 years in 2017 – thus leaving in the hands of a foreign power an asset of highly strategic importance for the country – with most certainly a highly aggressive strategy by the Chinese government to get its hands on this port which some analysts call the “Chinese debt trap diplomacy.” After the ethnic cleansing of Tamils, the state apparatus was taken into the stranglehold of the Rajapaksha family. Mahinda Rajapaksa was president of Sri Lanka from 2005 to 2015 while his little brother Gotabaya Rajapaksa is president since 2020 (but probably more for a long time). The Rajapaksa’s stranglehold on national institutions is such that former President Maithripala Sirisena openly stated in 2016 that at least half of the public contracts awarded by the Sri Lankan government were tainted by corruption.
Let us summarize. From the early 2000s when the country appeared to be on a good development track and had encouraging prospects to today, Sri Lanka has slipped into a negative spiral due to uncontrolled indebtedness, declining FOREX reserves, the level of corruption that paralyzes the proper functioning of the state apparatus (which has caused the country to lose considerable assets) and the pandemic that has brought the tourism sector to its knees. To this must also be added ill-advised political decisions, particularly in the agricultural sector. The result of this explosive cocktail of corruption, political dynasty, mismanagement of public affairs and incompetence: Sri Lanka is now on the verge of bankruptcy and Sri Lankans are slipping into a misery that is becoming unsustainable. Moreover, social instabilities are multiplying, suggesting serious unrest if political solutions are not found quickly. Unless on guard, it may not be too long for us to find ourselves in similar economic crisis.