The pivotal role of entrepreneurship in Sri Lanka's economic development : an analysis of sectoral dynamics and government policy impact

Abstract

Introduction

Sri Lanka's economy has demonstrated remarkable resilience in the post- 2022 crisis period, achieving a robust 5.0% GDP growth rate in 2024, significantly exceeding World Bank projections of 4.4%. This economic recovery trajectory has been fundamentally driven by entrepreneurial activities across key sectors, positioning entrepreneurship as a critical catalyst for sustainable development. The Global Entrepreneurship Monitor (GEM) 2024/2025 report reveals that while 49% of potential entrepreneurs globally cite fear of failure as a primary barrier, an increase from 44% in 2019, developing economies like Sri Lanka present unique entrepreneurial dynamics that warrant comprehensive investigation (Bosma et al., 2024).

The entrepreneurial landscape in Sri Lanka exhibits distinct sectoral concentrations, with traditional industries such as tourism and apparel maintaining dominance, while emerging technology sectors remain significantly underdeveloped. With unemployment rates stabilising at 4.4% and labour force participation at 47.4% in 2024, understanding the mechanisms through which entrepreneurship contributes to economic development becomes crucial for policymakers seeking sustainable growth strategies (Central Bank of Sri Lanka, 2024). This research addresses the critical knowledge gap regarding the specific roles different entrepreneurial sectors play in Sri Lanka's economic development and the extent to which government policies have facilitated or hindered entrepreneurial growth.