Expansion in equitable growth

The Department of Census and Statistics yesterday released the full-year data of the country’s economic growth for 2013. The numbers reflect a welcome rebound in the economy, up by 7.3% in comparison to 6.3% in 2012. In 2009 and 2010, the economy grew by 8% and 8.2% respectively before suffering a setback. Many analysts called the 2012 slowdown a correction after what they described as overheating of the economy by virtue of 8% growth in the previous two years.

The Government and its promoters will welcome the 7.3% growth in 2013 and will emphasise the resilience of the economy primarily as well as how various policies have shaped such a recovery. The Government will also draw strength from the 2013 data since the Opposition has been vocal that the economy is in tatters.

The very source of data, the Department of Census and Statistics, had its share controversy when an ex-employee alleged that he was asked to revise data. This claim however was shot down by the department. Nevertheless, the question of credibility of data has always haunted the department. This is not unique to the current regime but also those of the past. The country’s shift to more globally-accepted method of data gathering and analysis is a welcome step, but the department has to address some of the perennial weaknesses in the system as well.

The Government on its part has the responsibility to ensure that economic growth, whether it is 6, 7 or 8%, is felt by the people. The Opposition as well as other critics have linked the recent growth to a boom in Government expenditure and projects. This criticism may be unavoidable and various infrastructure projects have helped to re-profile the country as well as improve the overall efficiency and convenience levels. The serious concern however is the inflated price of such infrastructure or State expenditure, leading to multiple allegations of corruption.

Equitable growth is aspired to by almost all developing countries because it is very challenging. For a country which is coming out of a 30-year conflict and has its own share of bad governance, the goal is Herculean. For economic growth to be felt across many communities, the best solution is ensuring consistent and transparent policies. This requires facilitation of economic activity at grass-root level, especially by the small and medium sector, which is the backbone of the economy.

As the economy evolves in a post-war era, there will be some sectors which thrive and others which lag. Whilst one could be content with 7.3% headline growth, the underlying challenges of Sri Lanka require a much higher growth and that too in the real economy.

Even if the economy were to grow by 8% or on a double-digit basis, the ordinary people may not benefit if such high numbers are powered by a bloated Government and State-pushed activity. Whilst a prudent macro policy is of paramount importance, the Government will have much to gain by empowering the rural economy in a sincere and concerted manner. Be it agriculture, fisheries, manufacturing, construction, tourism, other services or trading, a thriving SME sector is critical. These SMEs need new markets, local and foreign; they need to create jobs and incomes. The country also needs a greater degree of Foreign Direct Investment.

In 2014, whilst higher growth is envisaged yet again, unless the Government addresses some of the fundamental issues facing the economy, the desired level of expansion in equitable growth will remain elusive.