An overall measure of the size and shape of the internal market was provided by the Central Bank of Sri Lanka's breakdown of national income according to expenditures by the several sectors of the economy. In 1986 gross domestic expenditure was estimated at Rs200.3 billion. About Rs139.4 billion represented private consumption; Rs18.5 billion was for government consumption; and Rs42.3 billion went into fixed capital investment, of which almost Rs33 billion was in the state sector. The aggregate of private sector expenditures constituted just over 74 percent of total outlays.
No detailed information was available concerning consumer outlays in the late 1980s. Earlier surveys indicated that many families devoted about 50 percent of their total expenditure to food. Some government policies in the 1960s and the early 1970s kept inequalities of consumption relatively low. These measures included the subsidizing and rationing of essential goods, restrictions on imports of luxury goods, and heavy income taxes. The easing of many of these policies after the economy was liberalized in 1977 resulted in higher food prices and a flood of imported luxury items. According to the Consumer Finance and Socio-Economic Survey carried out by the Central Bank in 1978 and 1979, the poorest 10 percent of the population controlled 1.2 percent of total personal income, while the richest 10 percent had 39 percent of personal income.
Traditionally, the state has played an important role in retail trade. The government-controlled Co-operative Wholesale Establishment, which was created during World War II to handle the import and distribution of foodstuffs, had monopolies over the sale of imported sugar, canned fish, cement, hardware, and other products at various times in the 1960s and early 1970s. The monopolies were broken up after 1977, when government policy shifted toward promoting competition. In 1986 however, there still were 8,644 cooperatives serving as retail outlets. As in the past, they relied heavily on the distribution of basic consumer items such as rice, flour, and sugar under the food stamps scheme (see Budgetary Process, Revenues, and Expenditures , this ch.). They also helped overcome shortages of essential goods in areas where security difficulties made private business unwilling to operate. In 1986 their turnover was about Rs1.1 billion.
The ten state trading corporations in existence in early 1988 were expected to be commercially competitive with the private sector. Most were organized around specific commodities, such as building materials, fertilizer, paddy, textiles, gems, and drugs. Their total turnover was around Rs5.6 billion in 1986, down from Rs6.3 billion in 1985.
Importers and wholesalers had their own warehouses, most of them in Colombo, but some in the provinces. For the most part, wholesalers did not actively engage in trying to sell their wares, but left it to retailers to take the initiative. Markup margins varied widely. Inasmuch as traders were not generally in a position to obtain credit from institutional sources, sales tended to be on a cash basis, although the larger wholesalers did extend limited amounts of credit.
Data as of October 1988