How Sri Lanka reached this economic precipice?

My article in Moneycontrol on Sri Lanka’s economic crisis.

What a tragedy to see the beautiful island country keep getting into crisis every now and then.

The SL crisis also leads to memories of Subir Gokarn, former DG of RBI. In one of his earlier lectures I had heard, he had pointed to the movie Chennai Express. In one of the movie scenes, the lead actor Shahrukh Khan suddenly finds himself in a boat in the middle of a sea. On asking the crew, he realises that the ship is smuggling diesel from India to Sri Lanka. Subir’s point was as diesel is subsidised in India, it leads to the smuggling from India to Sri Lanka. And then he went onto argue that subsidies might be benefitting SL, they impact India adversely as it leads to higher deficits, inflation and so on.

Today SL is facing a major power crisis due to some really bad economic policy and messy politics. A liter of diesel is selling for a heft balck market premium. Wondering what Subir would say on the SL crisis?

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