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ISSN: 2277-4637 (Online) | ISSN: 2231-5470 (Print) Opinion Vol. 3, No. 1, June 2013
Dr. Velnampy.T*
Achchuthan.S**
ABSTRACT I. INTRODUCTION
Asia has enjoyed a remarkable growth performance Continuous increasing in Gross Domestic Product in
since the end of World War II. Both income per capita the real price is denoted as the economic growth. And
and labor productivity in most sectors have rapidly also, production scale of the country as a whole can be
increased toward advanced economy levels. In this enhanced by the economic growth. In an economy,
context, we have formulated the research questions resources are in the position of scare. Meanwhile, the
as to what extent contribution of Agricultural, needs and wants of the people are in the unlimited
Industrial and Service sectors influences on the manner. Due to that, the macroeconomic objective as
economic growth rate in terms of fixed price?. This achieving the economic growth in the hyper competitive
study was conducted in Sri Lankan perspective, environment is the complex phenomenon ( Huynh, 2007;
especially on economic growth structure. Data on Sahoo, Dash & Natraj, 2010; kibritcioglu & Dibooglu,
the economic growth structure from the year 1970 2001). Especially after 1990s, In the Asian perspective,
to 2010 were collected for the study purpose. Based East Asian countries grew faster than the rest of the
on our study, we have only found the 19.5 percent world for four key reasons: they had substantial potential
for growth rate, their geographical and structural
of the contribution, which is in the significant level.
characteristics were by-and-large favorable,
Mean time, remaining 80.5 percent is in the
demographic changes following World War II worked
inconclusive manner, because, the constant value is
in favor of more rapid growth, and their economic
not in the significant level. In this context, central
policies and strategies were conducive to sustained
bank of Sri Lanka should have the responsible to growth. Most importantly, the high-performing East
find out the factors influencing on the economic Asian countries recognized the imperative of joining the
growth. Further, the apex financial institutions as world economy through the promotion of labor-intensive
central bank should be in the accountability, manufactured exports. They promoted exports through
independent and also in the transparency perspective a combination of policies as free trade, convertible
to maintain the macroeconomic stability in the currencies, macroeconomic stability and through a set
nation. of innovative institutions (export processing zones, duty
Key Words: Economic Growth Structure, Sri Lankan exemption schemes, and incentive packages for foreign
Economic Perspective direct investment) (Rodelet , Sachs & Wha lee ,1997).
In which , China is the fast growing country in the world not. When we answerer this type of questions in the
for the last few decades and one of the defining features economical perspective. We should focus on the other
of the chinas growth has been investment led growth. macro economic variables as money supply,
Chinas sustained high growth and increased unemployment rate, exchange rate, price stability etc.
competitiveness in manufacturing has been underpinned even though, 5 percentage growth level is the sati
by a massive development of physical infrastructure ( factionary one in the South Asian Region. And also we
Sahoo, Dash & Nataraj, 2010). In contrast, in the Euro have seen that growth rate has been steadily increased
area, during the last three decades, euro area growth for last decade (2000-2010), (SriLankan Economic
has fallen behind peers. And also the unwelcome events Outlook, 2012; Central Bank Reports, SriLanka, 2000,
as unemployment, price instability, fluctuations in the 2005 & 2010).
exchange rates etc have been faced by the euro area. In the economic sectoral context, Asias long-run
Meanwhile, the financial crisis through the mortgage macroeconomic achievements have also depended
loaning system has been faced by the United States of importantly on policies that encouraged resource shifts
America. Due to that, the economic recession was from low- to high-productivity sectors. This applied both
occurred through the financial instability. Further, output to the overall shift from agriculture toward industry and
gap between advanced economies as United States of services and to the continuing move within manufacturing
America, United Kingdom & Europe countries and toward higher value-added products. Looking ahead,
Emerging economies ( Newly Industrialised Countries) a continuing shift of labor away from the still-large
as India, China and Singapore has been narrowing over agricultural sector will, especially in lower income
the past decade and is expected to narrow even further countries, provide an important channel to boost growth
going forward ( SriLankan Economic Outlook, 2012; and reduce rural poverty. Further efforts to increase
IMF Staff Discussion Notes, 2012 ). trade openness, ensure widespread access to education
and health care, and encourage entrepreneurship will
In the Sri Lankan Perspective, Sri Lanka has
help these countries sustain this vital transition. More
experienced a lower average economic growth rate
generally, ensuring significant structural flexibility,
during the period from 1960 1976. Of which, period
including in labor markets, while establishing effective
from 1970 -1976 country has shown a poor economic
social safety nets will prove increasingly important as
performance. This period is especially well known as
Asia strives to maintain its competitive edge, provide
the most trade restricted period of the economy. After
growing employment in industry and services, and make
that, the liberalization policy was adopted to the
significant inroads into poverty eradication (Jaumotte
economy. As results of the liberalization policy, the
& Spatafora, 2007). In this way, we have focused the
economic growth rate was increased dramatically.
study on the economic growth structure, sectoral
Further, in the period of 1987- 89, economic growth
perspective in the emerging economy as Sri Lanka in
rate was affected by the political instability. Later, in
the South Asian perspective. Therefore this study will
2001, negative growth level has been faced by the
help to the policy makers to get economic cues and
economy. Again the Political instability was the reason
insides.
for the particular economic recession. . However as a
whole, country has performed well after 1977 with
compared to the period before 1977 ( Herath, II. RESEARCH QUESTION
). Further, Sri Lankan economy has achieved the 5 The following research question has been formulated in
percentage growth level approximately for recent four this study as
decades ( Velnampy & Achchuthan, 2013). Due to that, What extent contribution of Agricultural, Industrial
we should have responsibility to answer the question and Service sectors influences on the economic growth
like whether these achievements are in the effective or rate in terms of fixed price?
Ocampo and Throp, 2000; Ocampo, ). Further, contribution of agricultural, industrial and service sectors
Ocampo () has noted that, the focus on the and economic growth are in the lacking manner especially
structural dynamics helps to identify the specific policy for an emerging economy like Sri Lanka. Due to that,
areas authorities should target to accelerate economic this study seeks to bridge an important by empirically
growth. Accordingly, efforts should be made to : (1) examining the relationship between contribution of
Encourage innovation, a strategy of diversification of Agricultural, Industrial and Service sectors and the
the production structure is the key to increased economic growth rate in terms of fixed price in the Sri
innovations and (2) Encourage the development of Lankan Context.
the complementarities that generate positive demand,
particularly in terms of the development of the sectors V. HYPOTHESES DEVELOPMENT
that produce specialized inputs and services H1: There is a significant impact of Sectoral
(Knowledge, Logistics and Marketing Services) a strong contributions in the gross domestic product on the
and deep domestic financial system, and adequate economic growth.
infrastructure.
H2: There is a significant relationship between
In the economic structure, Agricultural sector
agricultural sector contribution in the gross
provides resources to the non-agricultural sectors not
only, but also an important market for the industrial domestic product and the economic growth.
products. Industrialization can be stimulated by the H3: There is a significant relationship between industrial
agricultural sector (Gamhewage and Peiris, 2012; sector contribution in the gross domestic product
Delgado, 1994; Timmer, 1988). In contrast, Yao (2000) and the economic growth.
has done the study on how is agriculture important in H4: There is a significant relationship between service
Chainas economic growth. Findings revealed that sector contribution in the gross domestic product
agricultures share in the GDP (Gross Domestic Product) and the economic growth.
declined sharply overtime; it was yet an important force
for the growth of the other sectors. VI. METHODOLOGY
Worlds developed economics have already
completed the transition to service economies while the Data collection
emerging economies are still making their way to that Secondary data which are collected from the Central
level through structural changes. In the Sri Lankan bank reports, Sri Lanka have been utilized in this study.
context, the dominance of service sector and its Further, textbooks, journals, magazines in the Economic
unceasing growth make it play a vital role in the perspective were utilized for this study.
economic development. The transition from agricultural
to industrial economy which was expected after the Sample
industrial revolution in 1977 is now smoothly transiting This study was conducted in Sri Lankan perspective,
to the service economy. Further, the service sector is especially on the Economic Growth Structure, Sectoral
found to be the most influential sector in the Sri Lankan context. Data on the economic Growth Structure from
context. It can be the most influential because it accounts the year 1970 to 2010 were collected for the study
approximately 58% of the countrys GDP in the recent purpose.
years. Furthermore, the service sector is the most
independent as other two sectors heavily depend on it Data analysis method
(Gamhewage and Peiris, 2012). Various statistical methods have been employed to
All these previous studies on the economic growth compare the data. Descriptive statistics used to test
in the Sectoral Perspective have made the useful the sample characteristics. Time series analysis was also
contribution to understanding the insides of the study. carried out to identify the trends over the last forty years.
However, studies related to the linkage between the Inferential statistics like correlation and regression which
www.cpmr.org.in Opinion: International Journal of Management 35
ISSN: 2277-4637 (Online) | ISSN: 2231-5470 (Print) Opinion Vol. 3, No. 1, June 2013
20
Based on the time series analysis, we have identified
the economic cues in the Sri Lankan context; After the
10
1970 1975 1980 1985 1990 1995 2000 2005 2010
1990s, agricultural contribution has been decreasing
AG ID SER
continuously. Finally it reached as 12 percent in terms
Figure 1 Time Series Analysis
growth in the long term point of view; meanwhile, the EG 1 -.319 .430 .241
sig .042 .005 .130
agricultural sector should be integrated in the industrial
AG 1 -.680 -.973
sector to get the economic growth. It means that, the sig .000 .000
inputs in the industrial sector should be taken from the IN 1 .492
domestic agricultural sector. That will give the value sig .001
additions within the country. Finally, these kinds of SER 1
activities can induce the standard of living of the people sig
in the rural and also in the urban areas. In the industrial According to the Correlation analysis, there is a
view, manufacturing sector has contributed to the gross significant relationship between agricultural sector
domestic product as 17 percent in the recent year 2010. contribution in the gross domestic product and the
In which, garment industry has played a major role economic growth, which is significant at 0.05 levels (P
(Central bank report, 2010) < 0.05). Further, the relationship between two variables
Service sector contribution has also been steadily is in the negative trend. Hence the H2 is accepted.
increasing since 1980. Further, in recent year, 2010, in In the industrial sector view, there is a significant
the service sector, 23 percent of the gross domestic relationship between industrial sector contribution in the
product has been contributed by the whole sale and gross domestic product and the economic growth, which
retail sector, which was the highest percent in the service is significant at 0.05 levels (P < 0.05). Further, positive
sector contribution. Mean while, we have indentified significant relationship has been found. Therefore, the
H3 is also accepted.
the facts that contribution of banking, insurance in the
financial sector has been increasing dramatically. In 1977, In contrast, there is no significant relationship
between service sector contribution in the gross
1.9 percent of the gross domestic production has been
domestic product and the economic growth, which is
contributed by the banking and insurance sector. In 2010,
not significant at 0.05 levels (P > 0.05). Hence the H4
9 percent of the GDP has been contributed by the is rejected.
banking and finance sector to the national economy
(Central Bank Reports, 1977, 2010). In Sri Lanka, the Regression Analysis
rapid growth of banking and other financial services The purpose of Regression analysis is to find out the
provide the financial infrastructure facilities to the significant impact of Sectoral contribution in the gross
economic expansion and structural transformation .this domestic product on the economic growth. Table No
is clearly reflected in the growth of assets in the financial 03 presents the results of the Regression analysis. In
sector and the contribution of the financial sector to gross which, Sectoral contribution is considered as
national product in last ten years (Abeysekera and independent variable. And Economic growth is
Hewawasam , 2010) considered as dependent variable.
In this context, we have made some suggestions to strategies. Specially, the entrepreneurs in the
the Sri Lankan economy to emerge as a successful country should be empowered. Contribution of
economy in the south Asian region. the North and Eastern part of Sri Lanka to the
In 1999, Research Institute for Development and GDP is very low. Women headed families are
Finance, Japan Bank for international Cooperation have there, so that the government can take necessary
done the study in the issues of sustainable environment action to increase the contribution to the GDP by
growth from the Asian countries perspective. With the empowering such people.
help of the findings and suggestions of the particular Promotion of small and medium sized enterprise
broad study, we have suggested to Sri Lankan economy as supporting industries. Entrepreneurship is a key
to enhance the growth strategically. driver of our economy. Small business started by
entrepreneurially mined individuals creates wealth
Agricultural sector development perspective: and high majority of employment opportunities.
Revision of Agricultural policy through the Carry out human resources development, which
comprehensive master plan. The government matches the industrial development (education and
should have the responsibility to promote the training which emphasizes industry-university co-
development of the agricultural base through operation, introduction of tax preferential measures
financing for farmers, and to solve the poverty for the internal education, etc.).
problems in the rural communities.
Promote science and technological development
Improvement of equity in agricultural development in priority industries such as machinery,
and development through training capable persons. electronics, petrochemicals, construction, housing,
Preparing regional infrastructure and agricultural automobiles and infrastructure, etc.
development by promoting research in agricultural To ensure the environmental protection,
fields. introducing preventive measures for environmental
The government promotes development of pollution (introduction of the clean technology,
agriculture and in the rural communities through establishments of environmental assessment of
financing for farmers, and resolves the problem of projects etc.)
poverty in the rural communities. Meantime,
monitoring activities should also be carried out after Service sector development perspective:
the financing in order to make the success in their Strengthening the banking system, the ministry of
ventures. finance and central bank of Sri Lanka should
establish the monitoring system of financial
Industrial sector development perspective: institutions to support the fiscal policy of the
To stimulate the domestic demand and job country.
creation through the public investment (implement To stimulate the export promotion through the
the labor intensive projects both in cities and rural grant , tax reduction , tax relief etc through the
areas). fiscal policy of the country
The Sri Lankan government should formulate the To formulate the Macroeconomic stabilization
industrial structure master plan in order to build plans. In which, other macro economic variables
an export oriented system. Meanwhile, as price stability, employment opportunities,
government should focus on the interest rate, long interest rate, exchange rates etc.
term fund, natural resources, industrial
Ensuring the health of the banking system by
entrepreneurs, capital requirements, technology,
establishing monitoring of bank business, audits,
finance, marketing, and product development
www.cpmr.org.in Opinion: International Journal of Management 39
ISSN: 2277-4637 (Online) | ISSN: 2231-5470 (Print) Opinion Vol. 3, No. 1, June 2013
information disclosure, and warning functions 6. Hearth, S.P (). Impact of Trade
under leadership of the Ministry of Finance and Liberalization on economic growth of Sri Lanka:
Bank of the country. An Econometric Investigation, Faculty of
Improvement of market system by appropriate Business studies and finance, Wayamba
principle of competition, improving the University of SriLanka.
transparency of the financial sector, improvement 7. Huynh, ND. (2007). Budget Deficit and
of commercial laws, and improving the capability Economic growth in developing Countries: The
of the bureaucratic system case of Vietnam. Kansai institute for social and
Finally, we can note that, theses perditions surely economic research
will help to the policy makers, academics, students in
8. IMF Staff Discussion Note (2012) : Fostering
the economic perspective to take the decision in terms
growth in Europe now: International Monetary
of economic growth in the Sri Lankan point of view.
Fund.
And also policy makers may take the cue from these
studies. 9. Jaumotte, F. and Spatafora, N.( 2007) : Asia
Rising : A sectoral perspective, International
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