The Export Engine of Growth and Neoliberal Reforms in Sri Lanka

The paper presents an empirical analysis of six different episodes, where exports acted as an engine of growth with varying degrees of locomotion in post-independent(1948) Sri Lanka. Sri Lanka inherited a robust export oriented plantation economy when it achieved political independence. However, the gains from plantation exports leaked to foreign investors. This led to the adoption inward looking import substituting industrialization by nationalist socialist governments that triumphed at the hustings. But, the inward looking import substituting industrialization strategies of the socialist governments delivered diminishing growth dynamics by slowing down the export engine of growth. In 1977 there was a regime shift due to the election of a neo-liberal government that claimed allegiance to free market capitalist polices as enunciated by the 'Washington Consenus'. Under the neo-liberal reforms exports as an engine of growth gathered steam and delivered a high growth dividend with low inequity, exacerbating social and ethnic tensions.The paper also reports the results of Granger causality tests that examine the validity of the de Novo hypothesis in the context of Sri Lanka