Abstract:

Even though SMEs play important role in both developed and newly industrialized countries, what is the observable fact from available statistics is that SMEs don’t have significant positive impact on the Sri Lankan economy. In other words, direct contribution of small and medium enterprises in changing poverty status and boosting economic growth is questionable in Sri Lanka. Despite vast number of SMEs is in Sri Lanka, its contribution on national economy is not satisfactory. Further, this study clearly shows that there is positive relationship between economic growth and SMEs but, impact of SMEs on economic growth is not significant in Sri Lanka. The co-efficient of SMEs is 0.02 indicating that there is positive relationship between economic growth and SMEs but impact of SMEs on economic growth is insignificant. Its p-value is 0.54 in output 1and 0.59 in output 2 indicating that there is insignificant impact of SMEs on economic growth of Sri Lanka The output of this study also proves the above said conclusion that SMEs don’t have significant impact on economic growth of Sri Lanka while poverty has significant effects on economic growth. Visionary government is needed to launch the effective PPP programme which is so effective remedy to the successful promotion of SMEs and thereby boosting economic growth. Therefore, active private public participation (PPP) is needed to accelerate the growth and improvement of SMEs and thereby, its contribution to the economy can be enhanced. Thus, author suggests that public private participation (PPP) in regard to SMEs is an effective remedial measure to promote SMEs and enhance their contribution to the national economic development.