Inspired by the recent theoretical interest in the role of material factors in intrastate
conflicts, this article examines socio-economic inequality between ethnic groups in Sri
Lanka. Drawing on available empirical data, the article suggests that actual disparities in
income, education and employment between Sinhalese and Northeastern Tamils were small
compared with inequalities within each group, and that these inter-ethnic disparities were
decreasing in the decades since independence. However, although the two groups were
relatively equal and becoming more equal, inter-ethnic rivalry over access to economic
resources became instrumental in the intensification of ethno-political conflict in Sri Lanka. It
is argued that real and relative welfare losses among Northeastern Tamils, the politicisation of
key areas of disparity, and incendiary state policies served to transform relatively marginal
inter-ethnic disparities into salient political issues. The article seeks to build on these
observations to highlight the nexus between material grievances and ethno-political conflict,
and suggests that formulating public policies that address real and perceived inequalities will
remain important in resolving such conflict.