Wider income disparities among urban, rural and estate sectors

Although the rising household incomes have trimmed the country’s inequality to a certain degree, the wider disparities remain in incomes among urban, rural and estate sectors, the latest data from the Household Income & Expenditure Survey (HIES) for the year 2016 by the Census and Statistics Department showed.

According to the survey, the average monthly income of a resident Sri Lankan had gone up by Rs.16, 359 during 2016 to Rs.62, 359. 

However, such incomes adjusted for inflation or the general increase in prices in an economy referred to as the ‘real income,’ have increased by 15.8 percent or Rs.5, 922 to Rs. 43, 320 by end of 2016. 
Continuous increase in real income of an economy points to an improvement in the quality of life of its population as they could consume more goods and services with their rising income, which is higher than the rate of inflation in the economy. 

Colombo district was recorded having the highest nominal income with an average Rs.104, 581 monthly income for a family while the lowest was recorded for Kilinochchi with an income of Rs.31,576. 

This wider gap between the two districts is ample evidence of an apparent disparity in the income distribution across different regions of the country.  

However the two numbers do not necessarily mean there is a vast divergence in the economic well being of the people in the two districts as one is urban and run on a fully market-based system while the other is largely a self-reliant rural agricultural economy. 

In any case, the latter clearly lacks the economic opportunities capable of generating higher income.
The gini co-efficient, which is a widely used indicator to measure the income inequality, showed co-efficient of 0.45 in 2016 compared to 0.48 in 2012/13, pointing to a slight improvement in equality. But inequality gets deeper going from rural to estate sector.  The range of the gini co-efficient of zero indicates perfect equality and 1 indicates maximum inequality. Sri Lanka’s liberal advocates call for financial devolution into the provinces, a quality of a federal state of governance, which gives sweeping powers to the provinces to collect taxes and spend them within the administrative region to enhance the economic well-being and personal income of the people within the province. 

This creates higher accountability over the spending than blindly making an annual budget allocation to a province by the centre. 

But the issue has sparked huge controversy among a wider section of the society due to the fears that the proposed new constitution, which proposes devolution of power within a unitary state, offers an easy route to separatist political groups.