Gross Domestic Production by wijaindu

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									Gross Domestic Product


As important Economic indicator of a country we have to consider about the Gross Domestic
product (GDP). GDP refers to the market value of all final goods and services within a country in
a given period. It consists with three sectors. Agriculture, Industry and Services are those
sectors. Agriculture sector includes Tea production, Rubber production, Coconut production,
Paddy production, Fertilizer production and Fish production. Industry sector includes Electricity
sales to industries, Furnace oil sales and Industrial exports. Service sector also acts major role is
GDP.



                                                                                   Contribution to
     Sector           Value (Rs.Mn)       Share of GDP%       Rate of Change%
                                                                                     Change %
   Agriculture           315,644                11.9                 7.0                10.5
    Industry             760,219                28.7                 8.4                30.1
    Services            1,569,569               59.3                 8.0                59.4


In sri lankan economy as an indication GDP is very essential. Firstly we will see about the
Agriculture and its status how to indicate the economic environment. We can see the details of
agriculture in year 2010 contributed to GDP from 12 percent. It is a good feature of an economy
of self production. In 2010 tea and rubber production increased due to fair weather condition
and development in facilities. But coconut production was declined since some consequences.
Several programs started like “Divi neguma” to develop cultivation throughout the country.
Especially in north and east area.

Industrial sector recorded huge growth in 2010 from 8.4 percent. Especially rural industries and
other machinery production have been increased in 2010. It was a significant feature in good
economy. But textiles and jewelry industry were decreased due to increase the price of input
and trade barriers. Industry sector had contributed to change of GDP from 30 percent; it says
the value of industry sector to sri lankan economy.

When we see the service sector it also acts significant role in GDP of sri lanka. 1,569,569 million
rupees valued the services production for GDP. It takes almost 60 percent. After ending of the
terrorism activities services sector developed in 2010 from 8 percent. Telecommunication,
banking, insurance, tourism etc helped to develop service sector in 2010. With advance
technology telecommunication spread throughout the country, policy changing and investment
opportunities helped to develop banking and insurance field. After the war many of tourists
arrive to sri lanka as safe destination so it helped to develop tourism field in 2010.



When we consider about sri lankan GDP Growth between 1991-2000 was 5.2 average. But in
2010 it recorded 8.0 growth rates. It indicates the success of the programs of government to
develop the domestic production with the passage of time. We can compare the sri lankan GDP
growth rate with several major economic holding countries.




                                     GDP Growth %
      Country               1991-2000             2009                          2010
         USA                   3.3                -2.6                           2.8
        India                  5.3                 6.8                          10.4
      Sri lanka                5.2                 3.5                           8.0
World economic outlook (IMF) 2010 October



According to the above table simply we can compare the sri lankan GDP growth with USA and
India. When USA recorded -2.6 growth rate of GDP in 2009 sri lanka recorded 3.5 positive rate.
In 2010 also sri lanka recorded sound GDP growth rate greater than USA. But Indian economy is
much powerful than sri lanka in GDP growth. They recorded 10.4 growths while sri lanka
recorded 8.0 in 2010.



National Accounts



National accounts mean the major accounts that show the income and expenses of a country in
a given period. Gross Nation Product (GNP), GNP per capita, GDP per capita, Expenditures and
savings are included components of national accounts. As a developing country sri lanka needs
to maintain
According to the world economic outlook database we can compare sri lankan national
accounts indications with other several countries.

Gross National Product (GNP) of Sri lanka recorded 41,881 US$ million in 2009. India recorded
it as 1,242,640 in same year, Pakistan recorded 163,533. So we can see that although ending
terrorism government helped to develop national product with their best. It can see when we
check the GNP in 2000 as 16,292 $ million.

Per Capita Income

 14000


 12000


 10000


  8000
                                                                       GNI Per Capita
  6000                                                                 GDP Per Capita


  4000


  2000


     0
            Sri Lanka      Thailand      Malaysia
We can see the per capita income in 2009 of Sri lanka, Thailand and Malaysia. GNI per capita
and GDP capita indicate the economic level and condition of Economic environment of the
country.

When Malaysia and Thailand recorded historical per capita level in 2009 as 7800 and 13000 $
sri lanka only grown it for 4200 $ per GDP. So directly understand there is some falling of sri
lankan economy with other economies. For this matter mainly affected

      Decreasing production of the country due to increasing the prices of infrastructure
       facilities.
      Terrorism activities defected to growth of production.
      Many of products are profitable when importing rather than producing.
      Most of investors gave up their new business ideas.

As the result of that per capita income level was in developing countries lower level, but end of
the 2011 indicated sri lanka now in the middle level income holding country. So it says now sri
lankan economy is on different track.

Agriculture and Industries

As we know Agriculture and industries contribute in a significant way to economy of a country.
It is important to decide the economical environment condition of a country through the level
of agriculture and industries in national accounts.

Agriculture
Arable land % of land area                                                15.0
Forest area % of land area                                                29.9
Permanent cropped land % of land area                                     14.7
Cropped land per capita, Hectares                                         0.1
Share of agriculture in GDP %                                             12.0
Index of agriculture production                                           106
Paddy production % of world paddy production                              0.7
Yield of paddy production , kg per Hectares                               4,137
Per capita paddy production, kg                                           168
Industries
Share of manufacturing in GDP %                                           19.0
Index of manufacturing                                                    -
Electricity production per capita, kwh                                    417
Energy use per capita, kg                                                 369
We can clearly see in agriculture section only arable land 15% from entire land area. It seems to
be have decreased the agriculture capability in sri lanka. As well as permanent cropped land
14.7% also indicates that there is a decrement of sri lankan agriculture level and standard. Sri
lankan paddy production was at least 5% before the 70s decade, but now it’s only 0.7% from
world paddy production. Granary of the Asia is now not in a proper level of their agriculture
level.

Also about industries sector we can see both development and decrement. Share of
manufacturing in GDP now 19% present, it says sri lanka is on the way of industrial
development in near future. We know like japan there is at least 60% contribution for GDP from
industrial sector, but as a developing country sri lanka has to wait and see about their
development in industrial sector.



Social Indicators
Many of social indicators say about the sri lankan economy. While sri lankan government tries
to develop the country towards the “Wonder of Asia” social indicators help to prove it
according to the view of socio economy. Following social indicators can be used to analyze the
sri lankan economic environment.

      Human Development index
      Literacy rate
      Labor force
      Population below the poverty line
      Telephones per 1000 persons
      Televisions per 1000 persons

Human development index is one of major measurement. The Human Development
Index (HDI) is a composite statistic used to rank countries by level of "human development",
taken as a synonym of the older term standards of living, and distinguish "very high human
development", "high human development", "medium human development", and "low human
development" countries. The Human Development Index (HDI) is a comparative measure of life
expectancy, literacy, education and standards of living for countries worldwide.

In 2010 sri lanka scored 0.658 in HDI. By comparing with Norway it recorded first place scored
0.943. but sri lanka is in the top of HDI in South Asia. So it indicates sri lanka is in a good
position of HDI components.
Literacy rate also says the education level of a country. Primary, secondary and high education
helps country to develop it. Sri lankan male literacy rate 91% and female 89% says the level of
education. Sri lankan free education system helps to improve the literacy rate of sri lanka.
Indian literacy rate male 77% and female 56%.

Labor force with secondary education, female (% of female labor force) in Sri Lanka was 15.90
as of 2007. Its highest value over the past 7 years was 19.80 in 2005, while its lowest value was
15.90 in 2007.Labor force with secondary education is the proportion of the labor force that
has a secondary education, as a percentage of the total labor force.Source: International Labour
Organization, Key Indicators of the Labour Market database. Labor force with secondary
education, male (% of male labor force) in Sri Lanka was 16.00 as of 2007. Its highest value over
the past 7 years was 18.70 in 2005, while its lowest value was 15.50 in 2002.Labor force with
secondary education is the proportion of the labor force that has a secondary education, as a
percentage of the total labor force. Sri lankan labor force is strong and skillful so it helps to
improve the country’s productivity.

National estimates of the percentage of the population falling below the poverty line are based
on surveys of sub-groups, with the results weighted by the number of people in each group.
Definitions of poverty vary considerably among nations. For example, rich nations generally
employ more generous standards of poverty than poor nations. In 2010 sri lankan population
below poverty line was 8.9%. It means sri lanka still could not find solution for the poverty
problem of sri lanka.
Inflation



In economics, inflation is a rise in the general level of prices of goods and services in
an economy over a period of time. When the general price level rises; each unit of currency
buys fewer goods and services. Consequently, inflation also reflects erosion in the purchasing
power of money – a loss of real value in the internal medium of exchange and unit of account in
the economy. A chief measure of price inflation is the inflation rate, the annualized percentage
change in a general price index (normally the Consumer Price Index) over time

The inflation rate in Sri Lanka was last reported at 3.8 percent in January of 2012. Inflation rate
refers to a general rise in prices measured against a standard level of purchasing power. The
most well known measures of Inflation are the CPI which measures consumer prices, and the
GDP deflator, which measures inflation in the whole of the domestic economy.
External Trade and Finance



After the liberalization of the economy in 1977, the trade deficit widened enormously as the
import bill soared under the influence of the government's development program. Exports,
however, remained largely static. The trade deficit thus expanded year by year and reached
nearly Rs20.5 billion in 1982, equal to 22.4 percent of GDP. In 1983, as a result of good
agricultural production, the deficit was held to the same level as in 1982. The following year,
1984, the deficit was cut to Rs10.2 billion as a result of exceptionally high tea prices. This gain
was not sustained in 1985, when the trade deficit rose to Rs17.8 billion. In 1986, despite a static
level of imports attributable primarily to the decline of world oil prices, the trade deficit again
widened, to around Rs20.5 billion. Sharply reduced earnings from tea were only partly offset by
improved exports of manufactured goods, especially textiles. Preliminary figures for 1987
showed a record trade deficit.

Although the island's balance of payments position was closely related to the balance of trade,
foreign aid and remittances from Sri Lankans employed overseas made the balance of
payments more favorable than the balance of trade. As a result, Sri Lanka occasionally ran a
small balance of payments surplus in the 1960s and 1970s, and again in 1984, when the
economy benefited from high tea prices. In 1986 Sri Lanka had a balance of payments deficit of
US$406 million, down from US$556 million in 1985. The main factor was the trade deficit of
US$750.2 million. Private transfers, mostly remittances, amounted to US$294.5 million, about
half of which were from the Middle East. Official transfers, including aid from governments and
international organizations, accounted for US$181.2 million. Sri Lanka's services account ran a
deficit. Exports of services, including earnings from tourism, were US$378.1 million, while
imports in this sector, including interest payments on foreign loans, amounted to US$509.6
million.



Income Distribution



Income distribution has always been a central concern of economic theory and economic
policy. Classical economists such as Adam Smith, Thomas Malthus and David Ricardo were
mainly concerned with factor income distribution, that is, the distribution of income between
the main factors of production, land, labor and capital.

Modern economists have also addressed this issue, but have been more concerned with the
distribution of income across individuals and households. Important theoretical and policy
concerns include the relationship between income inequality and economic growth.

The distribution of income within a community may be represented by the Lorenz curve. The
Lorenz curve is closely associated with measures of income inequality, such as the Gini
coefficient.
According to the indicators and methods we cannot see proper income distribution in sri lanka.
Most part of income is divided among 20% of population in sri lanka. As the result of that the
poverty level had been increased. By comparing other developed countries sri lanka should
concern about the income distribution.




Labor force and Employment



We can see past few decades sri lanka could increase its labor force and employment level in
number of units. It is easy to find skillful and practiced labors for minimum cost on behalf of any
investment opportunity. Sri lanka has strong labor force, and their productivity is very high. In
2010 sri lankan labor force was 8,108,000 and 67% male and 33% female. 32% percentage from
total labor force works in Agriculture, livestock and fisheries sector. With comparing other asian
countries sri lanka has good employment level and labor force.

Most of asian countries has to pay higher cost to the employees and it may be disadvantage to
new investments. But in sri lanka new investors can be gained much profit by using labor force
in low cost. As the measurement Labor force and Employment now in a good position in sri
lanka. During 2001 to 2004 season employment level decreased but after 2004 under the new
government made many of employment opportunities for the people.
Unemployment



Unemployment (or joblessness), as defined by the International Labor Organization, occurs
when people are without jobs and they have actively sought work within the past four weeks.
The unemployment rate is a measure of the prevalence of unemployment and it is calculated as
a percentage by dividing the number of unemployed individuals by all individuals currently in
the labor force. In a 2011 news story, BusinessWeek reported, "More than 200 million people
globally are out of work, a record high, as almost two-thirds of advanced economies and half of
developing countries are experiencing a slowdown in employment growth

The unemployment rate in Sri Lanka was last reported at 4.1 percent in the second quarter of
2011. This page includes a chart with historical data for Sri Lanka's Unemployment Rate.
Unemployment rate is defined as the level of unemployment divided by the labor force. The
labor force is defined as the number of people employed plus the number unemployed but
seeking work. The no labor force includes those who are not looking for work, those who are
institutionalized and those serving in the military.
Since 2005 sri lankan unemployment rate has been decreased. Commencement of new
projects, new business opportunities have made lot of employment opportunities rather than
past few decades.




Price Index



A price index is a normalized average (typically a weighted average) of prices for a given class
of goods or services in a given region, during a given interval of time. It is a statistic designed to
help to compare how these prices, taken as a whole, differ between time periods or
geographical locations.

Price indices have several potential uses. For particularly broad indices, the index can be said to
measure the economy's price level or a cost of living. More narrow price indices can help
producers with business plans and pricing. Sometimes, they can be useful in helping to guide
investment.

Some notable price indices include:

      Consumer price index

      Producer price index

      GDP deflator




We can see at the Colombo Consumers’ Price Index(CCPI) showed 128 units in 2005 but it
increased about hundred units in just 5 years as 219 units in 2010. In shows the increment of
prices level in sri lanka. It directly affects to the inflation too. So government needs to concern
more about that.
Exports


A history dating back to the birth of time, Sri Lanka is a small miracle in the Indian Ocean in
South Asia. A nation with a tropical weather it is a place where the original soul of Buddhism
still flourishes and where nature's beauty remains abundant and undamaged. Sri Lanka had
strong economic growth rates in the recent years compared to the South Asian region. Apparel,
tea rubber and coconut export contribute more to the Sri Lankan economy, while export
contributions in agricultural products show a dramatic increase in the export market. In
addition to these economic sectors, overseas employment contributes highly in foreign
exchange.

The Island has also won its name in the export market for their best quality spices, gems &
jewelers, handicrafts, aquarium, coir products, leather products and household products
there’s no doubt Sri Lanka name stands upon others for such products because of the unique
and high quality finishing.




Majority of sri lankan exports included Industrial exports, especially Textiles and Garments.
There is a huge demand for sri lankan exports in world market. In Asia india and China is the
major exporting countries. Sri lanka has to compete with those leading competitors to capture
the world market for sri lankan exports.
Imports



An import is any good or service brought into one country from another country in a legitimate
fashion, typically for use in trade. Import goods or services are provided to domestic consumers
by foreign producers. An import in the receiving country is an export to the sending country.
Imports, along with exports, form the basis of international trade. Import of goods normally
requires involvement of the Customs authorities in both the country of import and the country
of export and is often subject to import quotas, tariffs and trade agreements. When the
"imports" are the set of goods and services imported, "Imports" also means the economic value
of all goods and services that are imported. The macroeconomic variable I usually stand for the
value of these imports over a given period of time, usually one year.

Sri Lanka imports were worth 4706 Million USD in the second quarter of 2011. Sri Lanka imports
petroleum, textile fabrics, foodstuffs and machinery and transportation equipment. Main
import partners are India, China, Iran and Singapore. This page includes a chart with historical
data for Sri Lanka's Imports.
Sri lanka has imported about1, 500,000 million rupees valued goods and services from overseas
countries. For petroleum importing sri lanka has spent over 341,000 million rupees. This affects
to balance of payment and trade balance. Sri lanka has negative balance of payment and trade
balance also. It is not good indicates from a country.



Balance of Payment



Balance of payments (BoP) accounts are an accounting record of all monetary transactions
between a country and the rest of the world. These transactions include payments for the
country's exports and imports of goods, services, financial capital, and financial transfers. The
BoP accounts summarize international transactions for a specific period, usually a year, and are
prepared in a single currency, typically the domestic currency for the country concerned.
Sources of funds for a nation, such as exports or the receipts of loans and investments, are
recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign
countries, are recorded as negative or deficit items.

Sri Lanka is engaging in large-scale reconstruction and development projects following the end
of the 26-year conflict with the LTTE, including increasing electricity access and rebuilding its
road and rail network. Additionally, Sri Lanka seeks to reduce poverty by using a combination of
state directed policies and private investment promotion to spur growth in disadvantaged
areas, develop small and medium enterprises, and promote increased agriculture. High levels of
government funding may be difficult, as the government already is faced with high debt
interest payments, a bloated civil service, and historically high budget deficits. The 2008-09
global financial crisis and recession exposed Sri Lanka's economic vulnerabilities and nearly
caused a balance of payments crisis, which was alleviated by a $2.6 billion IMF standby
agreement in July 2009. The end of the civil war and the IMF loan, however, have largely
restored investors' confidence, reflected in part by the Sri Lankan stock market's recognition as
one of the best performing markets in the world. Sri Lankan growth rates averaged nearly 5% in
during the war, but increased government spending on development and fighting the LTTE in
the final years spurred GDP growth to around 6-7% per year in 2006-08. After experiencing
3.5% growth in 2009, Sri Lanka's economy is poised to achieve high growth rates in the postwar
period.

If sri lanka recorded positive balance of capital and financial Account but current account
indicates deficit. It is caused by the imports exceeded exports. As developing country sri lanka
needs to achieve good balance on trade account. Sri lankan income and service secotor earns
over 1,500,000 million rupees.
Interest Rate



The benchmark interest rate in Sri Lanka was last reported at 7.5 percent. In Sri Lanka, interest
rates decisions are taken by The Central Bank of Sri Lanka. The official interest rates are the
Repurchase (Repo) Rate and the Reverse Repurchase (Reverse Repo) Rate. This page includes a
chart with historical data for Sri Lanka's Interest Rate.
Interest rate of sri lanka changed in many times in past few years. Fixed interest rates show the
existence and stability of the economy of a country. But sri lanka does not have such kind of




fixed interest rates so sri lanka must stable the interest rates to build up the sri lankan economy
with good condition




From all of above indicators we can clearly see that how sri lankan economic environment
works. Some of above indicators are related to the social view and some are related to the
economical view.
Review and conclusion



     Sri lanka has good economic condition on overall economic indicators. But as a
      developing country sri lanka should maintain the economy in proper way to achieve the
      economical goals of sri lanka.

     Sri lanka is maintaining a higher GDP through few decades. It helps to manage the sri
      lankan economy. As well as it gives big advantage to sri lankan income distribution.



     GDP Growth also takes a place to keep sri lankan economy in a good position among the
      world economic stability. Since the past era sri lankan Domestic product field was
      independent and unique. So in present also sri lanka keeps well established GDP with
      the help of Agricultural and industrial sector.

     Every country tries to keep their National accounts in standard way and proper way to
      the country’s economical goals. Sri lanka keeps its national accounts according to the
      world standards.



     Inflation is a big burden for sri lankan government and economic authorities. Always
      inflation goes high as the result of price indexes increasing. Inflation rate not indicates
      proper condition on sri lankan economy.




     Imports and exports play major roles in sri lankan economy. Although sri lankan has
      strong exports section it is not enough to pay for the imports expenditures. So balance
      of payment and trade balance show the deficit.



  As overall condition sri lankan economic environment indicators show good condition. But
  some of major indicators life inflation, unemployment, balances of payment show fall of the
  economy. And most of other indicators show advantage of the sri lankan economy.
References



     Central Bank of Sri Lanka – Annual Report 2010
     www.cbsl.lk
     IMF report about sri lankan economy
     www.tradingeconomics.com
     Sri Lanka Census and Statistics Department reports
     www.magnitude.com

								
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