{"id":122970,"date":"2022-08-01T21:00:28","date_gmt":"2022-08-01T15:30:28","guid":{"rendered":"https:\/\/www.mapsofindia.com\/my-india\/?p=122970"},"modified":"2022-08-01T12:11:06","modified_gmt":"2022-08-01T06:41:06","slug":"why-india-cant-have-an-economic-crisis-like-sri-lanka","status":"publish","type":"post","link":"https:\/\/www.mapsofindia.com\/my-india\/government\/why-india-cant-have-an-economic-crisis-like-sri-lanka","title":{"rendered":"Why India can&#8217;t have an economic crisis like Sri Lanka?"},"content":{"rendered":"<p><span data-preserver-spaces=\"true\">The Sri Lankan economy has been experiencing a severe imbalance in its Balance of Payments (BoP). Its forex reserves are fast declining, making it incredibly difficult for the government to import essential consumer items.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">In Sri Lanka, the current economic crisis has been caused by historical imbalances faced by the country&#8217;s economy, conditions imposed by the International Monetary Fund (IMF), and authoritarian actions of the administration.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Let us find out the reasons behind the crisis in Sri Lanka:<\/span><\/strong><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">After 26 years of civil war, Sri Lanka recovered in 2009, with its postwar economy growing by an average of 8-9% per year until 2012.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Despite this, its average GDP growth rate declined significantly following 2013 due to a decline in global commodity prices, a decline in exports, and a significant increase in imports.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Sri Lanka&#8217;s budget deficits were substantial throughout the conflict, and the 2008 global financial crisis depleted its currency reserves. As a result, the nation had to borrow $2.6 billion from the International Monetary Fund in 2009.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Despite seeking an IMF loan of US $1.5 billion in 2016, Sri Lanka&#8217;s economic condition deteriorated due to the IMF&#8217;s conditions.<\/span><\/li>\n<\/ul>\n<p><strong><span data-preserver-spaces=\"true\">Financial Shocks faced in recent times<\/span><\/strong><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">The Easter bomb attacks in churches in Colombo in 2019, which resulted in several deaths, significantly reduced the number of visitors, causing a loss in forex reserves.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">During their campaign, the newly formed government led by Gotabaya Rajapaksa promised lower tax rates for farmers and a broader package of social programs for them.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The hasty execution of these ill-advised policies intensifies the situation.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">In addition, the COVID-19 crisis in 2020 exacerbated the situation, causing tea, rubber, spices, and textile exports to suffer.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">International tourist arrivals fall significantly, eventually leading to a decline in revenues.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Due to the COVID-19 pandemic, government spending increased in 2020-21 to overcome the shock, but the worsened budget deficit reached 10%, and the debt to GDP ratio reached 119%.<\/span><\/li>\n<\/ul>\n<p><strong><span data-preserver-spaces=\"true\">Fertilizer Ban law<\/span><\/strong><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">A ban on fertilizer imports was enacted in 2021, and Sri Lanka is set to become an agricultural nation based entirely on organic and natural processes.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The abrupt switch to organic fertilizers has a significant influence on food output.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">To curb rising food prices, a weakening currency, and rapidly depleting foreign exchange reserves, the President of Sri Lanka declared an economic emergency.<\/span><\/li>\n<\/ul>\n<p><strong><span data-preserver-spaces=\"true\">How is the case of India different from Sri Lanka?<\/span><\/strong><\/p>\n<p><span data-preserver-spaces=\"true\">As previously noted, several reasons contribute to Sri Lanka&#8217;s economic crisis. However, the case of India differs from that of Sri Lanka.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Let&#8217;s examine them one by one:<\/span><\/strong><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Forex reserve<\/span><\/strong><\/p>\n<p><span data-preserver-spaces=\"true\">On September 3, foreign exchange reserves reached an all-time high of $642 billion. This amounted to 14\u201315 months of imports for 2021\u201322. Moreover, the present foreign exchange reserve is adequate for ten months. As a result, India ranks higher than other rising economies in foreign reserves. Thus, it is in a stronger position to manage its economy successfully.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Agriculture Production<\/span><\/strong><\/p>\n<p><span data-preserver-spaces=\"true\">India is an agrarian society with ample resources to lead agricultural output. Following the introduction of HYV seeds into the country, it has become a net exporter in the agricultural sector. India has become self-sufficient and a significant exporter of farm products to advanced countries such as the United States, UAE, and Japan. It puts India on a firmer footing than other countries experiencing food shortages and price fluctuations owing to a lack of essential food items.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Growth of the Indian economy<\/span><\/strong><\/p>\n<p><span data-preserver-spaces=\"true\">It has the world&#8217;s fifth-largest nominal GDP and third in the purchasing power parity (PPP). The conclusion of the Cold War era and a severe balance of payments crisis faced by the Indian economy in 1991 prompted India to implement widespread economic liberalization. Annual GDP growth has ranged between 6 to 7% since the beginning of the twenty-first century, and from 2013 to 2018, India was the world&#8217;s quickest emerging major economy, overtaking China. However, several issues plague the Indian economy, including a shortage of trained labour, education, and corruption.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Finally, we uncovered this after examining India&#8217;s present economic scenario. It is well-managed, rapidly growing, and one of the world&#8217;s leading economies. It is unlikely that it would end up in the same circumstances as Sri Lanka or any other country confronting an economic collapse.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Sri Lankan economy has been experiencing a severe imbalance in its Balance of Payments (BoP). Its forex reserves are fast declining, making it incredibly difficult for the government to import essential consumer items. In Sri Lanka, the current economic crisis has been caused by historical imbalances faced by the country&#8217;s economy, conditions imposed by [&hellip;]<\/p>\n","protected":false},"author":21834,"featured_media":123417,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12287,12264,12420,4148,4,12360,5],"tags":[],"class_list":{"0":"post-122970","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-agriculture","8":"category-covid-19","9":"category-economy","10":"category-events","11":"category-government","12":"category-policy","13":"category-travel"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/122970","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/users\/21834"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/comments?post=122970"}],"version-history":[{"count":3,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/122970\/revisions"}],"predecessor-version":[{"id":123414,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/122970\/revisions\/123414"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/media\/123417"}],"wp:attachment":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/media?parent=122970"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/categories?post=122970"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/tags?post=122970"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}