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Doubling per capita income pointless if inequality persists

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PCI = Income of each Sri Lankan Rs. 235,000 a year
41.6 percent of population earn less than Rs. 84,000 a year
15.2 percent earn less than Rs. 27,000

A top public official says doubling Sri Lanka’s per capita income would be of no benefit if the majority of people did not have access to decent living conditions. The latest Central Bank annual report shows that each Sri Lankan has a share of more than Rs. 235,000 each of the country’s total income but 41.6 percent of the population actually earns less than Rs. 84,000 a year.

The per capita income is an indicator of the earning capacity of a country’s citizens for a given year and is derived by dividing the gross domestic product by the population.

Sri Lanka’s per capita income in 2009 was US$ 2,053 or Rs. 235,945 at market prices according to the Central Bank (US$ 1 = Rs. 114. 92). It has more than doubled from US$ 899 since 2000.

However, the population earning below US$ 2 a day is 41.6 percent of the total population based on a 1990-2005 survey but is still a relevant indicator included in the 2009 Annual Report of the Central Bank under a table Key Social Indicators. This amounts to an annual income of Rs. 83,891.6 (2x114.92x365).

According to latest data of the Department of Census and Statistics, 15.2 percent of the population lives below the official poverty line earning a little less than Rs. 27,000 a year (based on a 2006/2007 survey).

The Gini coefficient for Sri Lanka is 0.49 percent based on a 2006/2007 survey, as indicated in the latest Central Bank report. If the Gini coefficient is 1 it means there is absolute inequality, if it is zero it means that each household has the same level of income. Sri Lanka is in between.

Inequality has grown in Sri Lanka with the Western Province contributing close to 50 percent to the GDP but the government wants to change this trend.

The government said per capita GDP would be doubled to US$ 4,000 within the next five years (roughly Rs. 459,680 at Rs. 114.92 to a US dollar) but Treasury Secretary Dr. P. B. Jayasundera acknowledged that such an indicator, though achievable, would be meaningless if the majority of Lankans did not have access to decent living conditions.

He said this addressing the National Chamber of Exporters two weeks ago and again when the Central Bank launched its 2009 Annual Report last week.

Dr. Jayasundera said the thrust of the government’s infrastructure development activities were aimed at minimising regional disparities and inequality. He said the public sector and the private sector would both have to increase productivity levels if planned economic growth was to be realised.

 

~ The Island ~ By Devan Daniel

 

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