Despite Colombo’s reassurance that its relationship with India will not deteriorate, New Delhi remains concerned about the growing Chinese foothold in the island nation.

In a tit for tat move, India has stepped into collaborate with Sri Lanka’s rural water supply initiative following China’s annulment of the USD 90 million grant for the same purpose among several other sectors.

China’s announcement of the financial assistance for water supplies, medical care and education in rural areas came two days after the visit of high-level Chinese delegation led by China's top diplomat, Yang Jiechi, a Communist Party Politburo member and a former foreign minister.

Indian High Commissioner Gopal Baglay who met Prime Minister Mahinda Rajapaksa at Temple Trees in Colombo on Thursday (15) expressed India's willingness to collaborate with Sri Lanka with regard to its rural water supply initiative.

He spoke of the possibility to collaborate with Prime Minister Modi’s “Jal Jeevan Mission” (Water for Life Mission), which is the Indian government’s programme that aims to provide potable water for every household.

One priority sector for Prime Minister Rajapaksa is water and sanitation.

The Indian High Commissioner noted several areas on which the two countries could collaborate, including water requirements in schools, sanitation needs, rainwater harvesting, building of toilets for deprived areas, and a project that could convert sewage into fertilizer.

Prime Minister Rajapaksa indicated that the lack of safe drinking water in certain parts of the country is the main concern, including the role it plays in chronic kidney disease. This is now a key priority for the Sri Lankan government.

India announced a grant assistance of USD 15 million last month for the promotion of Buddhist ties with Sri Lanka besides affirming to expand the bilateral defence partnership with a view to stabilizing the Southern Indian Ocean region.

India has already provided a USD 400 million currency swap facility to the Central Bank of Sri Lanka in order to assist with economic recovery and to tackle the COVID-19 related disruptions.

An additional request for a bilateral currency swap arrangement worth around USD 1 billion by the Sri Lankan side remains under discussion. Technical discussions on Sri Lanka’s request for debt deferment are going on.

On the heels of a top Chinese delegation’s visit to Sri Lanka, Colombo is negotiating a USD 500 million loan with Beijing, as it gears up to repay a daunting USD 4.5 billion of its outstanding debt next year.

If sanctioned, the new loan would take Sri Lanka’s total borrowings from China this year over USD 1 billion, after the  USD 500 million “urgent financial assistance” that Beijing extended to Colombo in March, to help Sri Lanka cope with the economic impact of the pandemic.