Economic Growth, Poverty and Inequality: Update on the Discourse and Lessons for Sri Lanka

The interplay between economic growth, inequality, and poverty underscores the complexity of development dynamics and the challenge of alleviating poverty. Economic growth is necessary for poverty reduction; however, its adequacy is an issue that has been discussed for about 7 decades. Emphasis on growth promoting policies for reducing poverty fluctuated from time to time depending on the empirical findings. Availability of reliable data and improved computing facilities enabled quantifying the relationship between economic growth and poverty reduction. Many studies in the last decade of the 20th century and first decade of the 21st century confirmed that growth reduced poverty but effect of growth on poverty is heterogenous, hence supplementary policies are necessary to enhance growth effect on poverty. Moreover, the increasing inequality dampen the effect of growth on poverty. Sri Lanka is currently experiencing a crisis driven poverty and achieving higher rate of economic growth is critical for reducing wide-spread poverty.