Ten-year Horizon Development Framework - Ministry of Finance and ...

11 Introduction
1 Transforming Agriculture for
Economic Prosperity and Poverty Reduction
As in many other countries, the development of the industrial and service sectors in Sri Lanka has
been accompanied by a reduction in the contribution of agriculture to Gross Domestic Product (GDP)
The contribution of the agriculture sector to GDP from 1995 to 2005 was around 186 percent, which
indicates a 15 percent decline over the period 1985 to 1995; in fact there has been a continuous decline
in the late 1970s The contribution from agriculture sector to GDP at present stands at 172 percent
The contribution from the agriculture sector to employment has also decreased from 368 percent in
1995 to 307 percent in 2005
Even though the contribution from agriculture sector to GDP has halved in the last two decades,
agriculture still plays a vital role in Sri Lanka’s economic development This sector was the third highest
contributor during the last decade and the second highest contributor to employment, and was at 307
percent in 2005 It is the main source of livelihood of the rural population, which accounts for 70 percent
of the total population Therefore, the agriculture sector will remain as the largest in absolute terms, and
must be strengthened to attain higher growth rates and to play a dynamic role in the overall economic
development of the country
The average growth of the agriculture sector during the last four years was 12 percent compared
with 5 percent in industry and 7 percent in services Even though its relative position in the economy has
been declining with the growth of industries and services, because of its strong linkages with other
sectors, agriculture continuous to be the main element of Sri Lanka’s economy Therefore, the agriculture
sector is a significant determinant of national and provincial GDP
The ten-year development programme envisages that the agriculture sector will to grow at a faster
rate of 4-5 percent with a higher contribution coming from the non-plantation sector, such as other food
crops (non paddy), fruits and vegetables, fisheries and livestock Commercial orientation of the small
and medium scale operations in these sectors is expected to improve with continued support and facilities
to this sector, including improved access to bank credit
The agriculture sector will grow in absolute terms generating income in the rural sector thereby
partly contributing to rural poverty reduction Concomitantly employment opportunities in the nonagriculture
sectors namely industry and services will grow faster than the agriculture sector, which will
result in the falling of the share of agriculture employment to about 20 per cent from the current 30 per
cent of the labour force The growth opportunities in the non-agriculture sector, which could absorb
some of the freed farm labour, will contribute to rural poverty reduction The agriculture sector will be
made more efficient to increase the return to labour, which will also contribute to reducing rural poverty
The pro-poor and pro-growth income improvement and redistribution policies with complementary
participation of a socially responsible private sector and strong public sector are the focuses of the
economic development process The investment plan for the agriculture sector will include these objectives
Paddy dominates non-plantation agriculture It covers around 938,000 hectares or approximately
47 percent of the total area under agriculture It employs about half of the total agriculture labour force
The domestic rice requirement, which is now being met from local production, has been increased to 98
percent in 2005 from 89 percent in 2004
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