Many analysts held that the not-very-assuring economic prospects would dissuade the government from its ongoing war efforts in the Liberation Tigers of Tamil Eelam (LTTE) dominated Tamil areas in the north. Some of them even argued that Sri Lankan President Mahinda Rajapakse would soon be compelled to stop the war and take adequate steps to arrest the economic decline. A recent Peace Confidence Index (PCI) Survey by the Centre for Policy Alternatives (CPA) released on April 28 even showed that majority of the people were quite concerned about the way the  economy has been handled (63.6 percent of the Sinhalas, 88.7 percent of Tamils, 72 percent of the Up Country Tamils and 78.3 percent Muslims). However, a majority of Sinhalese people (over 60 percent) approved of Rajapakse's policy of waging war against the Tamils. As many as 63 percent believed that security situation improved considerably under Rajapakse.

Surprisingly, in spite of inflation and rise in popular concern over the state of economy, the government statistics showed that the economy grew by 7.5 percent . This must have assured the Sinhalese that the economy can withstand the war. That is why most of the Sinhalese now firmly believe that they have once-in-a-life-time opportunity to decimate the Tamil Tigers. Rajapakse has carefully built this constituency which supports the war as a necessary evil, something that may not be good, but is inevitable to protect the integrity of the Sri Lankan state.

The statistics on war-related casualties, therefore, do not perturb them, even if it has shocked the world. There has been a rise in violent incidents and casualties ever since the peace process hit  rock-bottom in 2006. It had come to a halt in 2003-4, but there was some hope of restarting the process and talks were on.

The casualty figures (culled from an Indian website, satp.org) for 2001 were 1812, a significant decline from 3791 in 2000. But the figures between 2002 and 2004 were 15, 59 and 109. They rose to 330 in 2005 and jumped to 4126 in 2006 and 4369 in 2007. Till May this year the figures hover around 4200, and are expected to rise. The rebels have undoubtedly suffered maximum casualties during the last two years (2319, 3345) and this year they have already lost 3636 cadres. These figures show violence in Sri Lanka is on an upward spiral. Given the resolve of the Rajapakse administration to move deeper into the LTTE controlled areas and the LTTE determination to defend themselves without surrender, Sri Lanka is likely to witness bloodier days ahead.

Does one conclude that people are extremely apathetic and indifferent to this war-game that has been going on for last three years? The facts on the ground would prove otherwise. The Sinhalese are enjoying it to the hilt with LTTE losing its hold over more and more territory every day. On the other side, the Tamils both in Sri Lanka and outside, who had developed a sense of fatigue with LTTE politics, are gearing up to provide moral and material support to LTTE. The spate of suicide bombing is expected to go up with the Tamils showing no sign of giving up too easily. For sometime, the LTTE wanted to wage open war with the Sri Lankan government. It conducted frontal assaults in the East and also carried out aerial attacks to show its prowess. But in changed circumstances, realising that no external help is likely to come and they cannot match the power of a state, they are expected to relapse into their earlier mode of guerrilla warfare.

One gathers that a significant number of Tamils had started looking away from the LTTE and moderate Tamil outfits were asserting themselves. The pro-LTTE political outfit, the Tamil National Alliance was coming up as a mediating agency between the LTTE and the government, if government were to recognise it as such. But with the war raging on, the moderation amongst Tamil seems to have evaporated completely. From one's contacts with many Tamils from Sri Lanka, people from the Tamil Diaspora and even the Indian (plantation) Tamils in Sri Lanka, one finds a revival of the militant spirit of the 1970s and 80s. They are all now firmly united to take on the might of the Sri Lankan state.

That the Sri Lankan government has not taken enough care to translate its military victory into political advantage would surprise any Sri Lanka watcher today. The All Party Committee Report is riven by dissension. Ultra-nationalists are now baying for no compromise with LTTE. In this context, the government has made a tentative attempt to wrest the East away from North and effect a virtual de-merger, contravening the spirit of the Indo-Lanka accord. The government has sworn nonetheless that it has conducted provincial elections in line with the recommendations of the same accord. There are also some who hinted that in the existing circumstances India has tacitly approved of the exercise.

The government has claimed since August 2007 that it has liberated the Eastern province from terrorism and is taking due care to introduce democracy and development there. The municipal elections in the East in March and provincial elections in May were thus touted as “message of freedom and democracy sent by Easterners to their brethren in the North”. However, these elections have not proved too beneficial for the government. There have severe criticism of the way the elections were conducted by analysts at home and abroad as well. Some moderates amongst the Sinhalese have termed them as a 'wasted opportunity'. The rejection of Sri Lanka's candidature for Asian Member at the UN Human Rights Commission is being attributed to the general perception gaining ground around the world that the government is throwing its human rights sensitivities to the  winds.
It is useful to underline the sense of apathy in the international community towards the increasing levels of violence and violation of human rights in Sri Lanka today. The inertia of 9/11 has made people look away from LTTE and its terror tactics. The government has taken full advantage of this international aversion towards terrorist groups. The methods adopted by Government since the peace talks started suggest that it had no intention ever to concede anything spectacular to satisfy the Tamils. To be fair to the LTTE, even if one were to argue that they could never be trusted, it was the  LTTE which had committed itself to finding a solution within a united Sri Lanka. It had also come out with a draft Interim plan for self government in Tamil dominated areas and held that it could be negotiated. But the government had summarily rejected it. If the LTTE allegedly took the help of the ceasefire to acquire arms and consolidate its position, the government also took due advantage of it and organised a division in  LTTE ranks. The subtle provocations from the government side to a terrorist organisation which had decided to turn over a new leaf were definitely not indicative of government's sincerity in the peace talks.

The international community and especially India, the big neighbour with a massive Tamil population in its southern flank, has so far treated the issue with blissful unconcern. There is a perception in Sri Lanka, especially amongst the Tamils that India has quietly encouraged Rajapakse's government to go the whole hog in its war against LTTE, taking care not to lead to a humanitarian crisis by targeting civilians. The government in Sri Lanka has carefully chosen its targets and minimised civilian casualty, people would say. But that has not made the government popular amongst the Tamils. There has been an increased flow of refugees into India and unofficial figures say the numbers have touched 100, 000 mark. Reports from Tamil media in India say that the refugees are supportive of the LTTE efforts and would do everything possible to help LTTE gather strength again.
Sri Lanka may thus be sitting on a time bomb. One may soon observe a reassertion of the LTTE after a tactical retreat. The government is not likely to go for any political solution and the Sinhalese overwhelmingly approve of a discriminatory and non-inclusive system. With no external player ready to play a definitive role in this ongoing crisis, the ethnic crisis in Sri Lanka is likely to fester.