Sri Lanka’s strategic location in the Indian Ocean has made it a focal point for major powers seeking to expand their influence and secure important maritime trade routes. Recognizing this, China has intensified its engagement through infrastructure investment and military cooperation, while India seeks to maintain its influence through regional partnerships and economic initiatives and other Western partners seek to expand influence and secure maritime trade routes. Given its status as a smaller yet consequential South Asian nation, Sri Lanka faces the challenge of balancing its national interests amidst the geopolitical and economic rivalry between these major powers. This chapter aims at understanding why Sri Lanka adopts a policy of non-alignment, avoiding taking sides, specially between major powers like China and India. Despite pressure from both sides, Sri Lanka endeavors to maintain a delicate balance to safeguard its sovereignty and national interests. Through a comprehensive examination of Sri Lanka’s diplomatic moves and strategic decisions, the authors seek to unravel the strategies employed by Sri Lanka to navigate the complex geopolitical and geo-economic rivalry between major powers such as China and India and its impact on Sri Lanka, how their military, strategic, political, and economic aspects shape Sri Lanka’s foreign policy decisions. The findings indicate that Sri Lanka has faced significant challenges due to the involvement of major global powers. In response to these challenges, the Government of Sri Lanka is taking deliberate steps to formulate and implement foreign policy goals that are aligned with national interests, aiming to optimize engagement with major powers while prioritizing economic recovery, strategic autonomy, and domestic stability.