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Tuesday, 6 January 2015 01:40 - - {{hitsCtrl.values.hits}}
Malaysia’s seemingly miraculous path to prosperity was no miracle, he noted, attributing it to efficient planning and management, close co-operation between government and private sector including foreign investors, and social stability.
Something’s wrong if SL’s GDP is rising but people’s income is falling
Addressing an annual conference in October, Finance and Planning Deputy Minister and International Monetary Cooperation Senior Minister Dr. Sarath Amunugama said: “Sri Lanka’s wealth was increasing in parallel to the rapid increase in the growth rate however if the people’s income was reducing with the high economic growth, it means that something has gone wrong.”
“In the wake of Sri Lanka achieving eight percent economic growth, the people’s income should increase proportionately,” Dr. Amunugama had stressed. “Therefore, with the increase in the economic growth rate, the people’s income should also increase,” he added.
The statistics from the Household Income & Expenditure Survey (HIES) 2012/2013, of the Department of Census and Statistics report which was recently released elaborates this further.
In the light of promises to reduce the budget deficit and the doubling of the GDP per capita, it clearly shows that something is wide off the mark.
The report gives a poor picture of people’s income. A senior economist confirms that the report shows the average of per capita income of the lower 16 million of Sri Lankans is below Rs. 7,000 a month. This is proven by a close look at the official data of the Household Income & Expenditure Survey-2013/14 table 1 of page 1.
From the chart you will see that the average income is just Rs. 27,000. This indicates that 80% of households live on Rs. 900 a day for an entire family of four (or 3.9 as average, stated in the survey). Sadly, this amounts to up to 16 million people earn less than $ 2 a day (applicable to current exchange rate of Rs. 131 – $ 1.0).
Adding to that the survey also shows that 80% of population regarded as rural population has a monthly Household expenditure of Rs. 33,826 against the average income of Rs. 27,007. The household can barely survive. How do they survive?
Where is the growth?
In a recent article in a newspaper titled ‘Where is the growth?’ the author stressed that it has consistently quoted the views of various economists and think-tanks that post conflict economic growth is largely driven by Government spending, which in this case is fuelled by debt, and construction.
Global economists have warned that this is not a sustainable model and the country risks getting into a debt trap. Sri Lanka’s debt has doubled in six years and trebled in the last 10 years according to the chart and has risen to $ 28.24 billion end 2013.
The people are paying for this.
The impressive average GDP annual growth of 6.8% in the last 10 years hardly helps when you realise that the US Dollar value has steadily dropped in the same decade by an average of 4.2 % annually to be at Rs. 131 from Rs. 89 in 1995. It would bring the country’s growth rate average to a mere 2.6%. Inflation in the last four years has increased 24.3%. This year alone inflation is 4.22% up to October 2014.
The infrastructure development is not justified as progress from an economic perspective. The prioritisation of various development projects and disciplined expenditure can be the only way to give the people more purchasing power: or as seen, if it continues unheeded, the country and the people will continue to lose.
Progress should not leave the poor behind
At the inauguration of the annual sessions of the Ceylon Chamber of Commerce in July, when the Chairman in his speech stressed that “progress should not leave the poor behind,” he would not have visualised that if the development drive does not benefit the people of the country, it is not only the poor who will be left behind.
(R. Ratnayeke, MBA UK, can be reached via [email protected].)
