Sri Lanka, a democratic country with a market-based economy, has
over the years progressively moved from a low-income country to a middleincome
country. Despite 25 years of civil war and the shocks of tsunami in
2004, the country’s economy has been resilient and has coped relatively well
with the challenges. The country is nevertheless grappling with maximizing
the benefits of globalization. This makes the development process
challenging. Interestingly, Sri Lanka’s social indicators, with a Human
Development Index Ranking of 99, are well above those in comparable
developing countries in South Asia. (ILO, 2008)
The sectoral composition of the economy has changed from an
agriculture-based economy to one dominated by the service sector. The
service sector was the highest contributor to GDP in 2010, with 57.8
percent, followed by the industrial sector at 29.4 percent and the
agricultural sector at 12.8 percent. With increasing economic liberalization,
the services sector has become the largest sector in terms of employment
with 43.1 percent of total employments. Agriculture, however, seems still to
be a key source of employments in rural areas (at 34.4 percent of
employments in rural areas), where the largest part of the population (49.8
percent of total labour force) resides. Around 63 percent of the workforce is
employed in the informal sector, of which a majority resides in the rural
parts of the country.