A wildfire doesn’t take much to turn the entire land into ashes. Sri Lanka can be seen on the same lines leading to the country’s social, economic, and political turmoil. The credit goes to the country’s freebies and its partnership with the communist nation. Unsurprisingly, China, being the “best friend” of the country has helped the 22 million population to stabilize, by aiding them to function as debt trapped.
Srilankan social unrest
On 9 July, Srilanka’s capital city Columbo outcried the difficulties faced by the millions of people. Thousands of protesters broke the police barricades and stormed President Gotabaya Rajapaksa’s official residence. With the facing of social unrest, President informed the speaker that he will be resigning on 13 July. Meanwhile, even Prime Minister Ranil Wickremesinghe conveyed that he is ready to resign and make way for an all-party government. However, he will serve as PM till the next cabinet is appointed.
Mock IMF discussion at President's house by Sri Lankan protesters pic.twitter.com/CXykNBInQf
— NewsWire 🇱🇰 (@NewsWireLK) July 10, 2022
More video footages have emerged of Sri Lanka security forces brutally attacking protesters moments before protesters entered the President's house yesterday pic.twitter.com/f6fSyEwc9X
— NewsWire 🇱🇰 (@NewsWireLK) July 10, 2022
Throughout the day, Army personnel and police officers were unable to control the crowd of protesters demanding Rajapaksa’s resignation. The outcry blamed the President for creating the worst economic crisis in decades.
As per the Indian Express, the President’s house was surrounded by hundreds of protesters, some draped in the national flag, packing into rooms and corridors. In addition, people were seen splashing in the swimming pool, while some sat on a four-poster bed and sofas. However, Rajapaksa had left his residence before the protest erupted, as a safety precaution.
Later on Saturday, it was noticed that a huge fire and smoke were seen coming from Wickremesinghe’s private home in an affluent Colombo neighborhood. In addition, his office said that protesters had started the fire.
📸 Protesters in President's official residence pic.twitter.com/dgEWT5lBdx
— NewsWire 🇱🇰 (@NewsWireLK) July 9, 2022
What led Srilanka to this condition?
Sri Lanka has been under soaring inflation, food crisis, fuel shortage, power outages, and many more difficulties which has infuriated the Srilankans. The inability of the political authorities to handle the deep graved economic stability has further given space to anarchy.
According to a 2019 paper by Asian Development Bank, Sri Lanka’s national income exceeds its national expenditure. The country does not produce enough tradeable goods which could help it increase its revenue. In short, freeloading was a big reason for starting this mess.
The economic crisis after the COVID-19 pandemic dampened the country into utter turmoil. It had shaken the tourism-reliant economy and slashed remittances from overseas workers. Further, the island got into a more dilapidated state with hefty government debt, rising oil prices, and a ban on the import of chemical fertilizers last year that devastated agriculture. The economy also stopped receiving fuel shipments, which propelled school closures and rationing of petrol and diesel for essential services. The crisis was accelerated by the deep tax cuts promised by Rajapaksa during a 2019 election campaign that wiped out parts of the Sri Lankan economy.
Amid all these economic and financial difficulties, the Rajapaksa government knocked at the IMF doors for help. But soon with this, Sri Lanka steeply devalued its currency, further stoking inflation and adding to the pain of the public, many of whom are enduring hardship and long queues.
China saw all this as an opportunity to gain a strategic edge over the nation and hold its economy hostage. For this, China gave loans with hefty interest to the already impoverished country. China’s economic and financial aid to the island were basically some tools to get an edge over its political and security leverage and then use it against India.
It was China’s strategy to push Sri Lanka in crisis. With a strategy to disarm Sri Lanka economically, the communist nation spent 95 percent of its income in unbalancing the Sri Lankan economy. This can portray the desperateness of China rubbing salt on the injury. Initially, China attracted the Sri Lankan administration with its hefty loans but soon betrayed with a “gift” of engulfing the economy into a severe debt trap.
Indian states are on the verge of becoming Sri Lanka
Recently, the RBI governor highlighted that some of the Indian states are on the verge of facing severe economic crises. The five most indebted ones include Punjab, Rajasthan, Bihar, Kerala, and West Bengal.
Amid the Sri Lankan crisis, the central bank paper highlighted the fiscal risks confronting state governments in India, with emphasis on the heavily indebted states. The slowdown in own tax revenue, a high share of committed expenditure and rising subsidies have burdened the state government finances which are already in the doldrums due to the coronavirus.
As per the report, risks have emerged with the relaunching of the old pension scheme by some states, rising expenditure on non-merit freebies, and expanding contingent liabilities. The author of the article further said, “Stress tests show that the fiscal conditions of the most indebted state governments are expected to deteriorate further, with their debt-GSDP ratio likely to remain above 35 percent in 2026-27.”
The debt-trodden Indian states are slowly and gradually getting ruined. And this is not the first introduction of freeloading culture to Indian states. Cases are getting repeated year after year with changing governments to attract the general population in order to fulfill their vote bank agendas.
Arvind Kejriwal-led Aam Aadmi Party (AAP) has a tendency of alluring people with freebies. It recognized that the only way to win over Punjab is providing people with free money. This is why AAP announced that after coming to power, it will be providing ₹ 1,000 per month to every woman in Punjab. Moreover, like Delhi, AAP promised that it will be providing free electricity for up to 300 units.
The same happened in Congress’s Ashok Gehlot-governed Rajasthan where the government could not vaccinate its masses due to a lack of funds in the state as it had drained all the funds on freebies.
The culture of freebies must be eradicated as it will only hinder India’s development. Some politicians who are good for nothing are risking the economic stability of states for their personal political agendas. These are the symptoms of Indian states on the verge of becoming Sri Lanka if the situation is not handled soon.
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