An expanding population over the years has exerted substantial pressure on the per capita land endowment and consequently on the per capita arable land availability in Sri Lanka. Limited land availability together with low productivity has forced much of the labour out of the agriculture sector. This has created a serious problem since the current rate of expansion of the other sectors in the economy, particularly in the rural areas, seems inadequate to absorb this displaced agricultural labour. In the absence of a well functioning land market in the rural areas, it is often argued the scarce land resource is not allocated to the best uses or transferred to the best users, further aggravating the problem of low land productivity. Apparently state intervention and imperfections in the credit and other factor markets worsen this situation. Market failure, poor property rights, institutional failure, policy failure and poverty have also been identified as major causes of the inefficient use and inequitable distribution of land globally, particularly in the South Asian region. However, problems related to land and land use cannot be simply generalized since they are influenced by the specific social, economic and political characteristics of each country.
This study attempts to give an insight into the working of the agricultural land sector of Sri Lanka with special emphasis on identifying key observable phenomena at the ground level and the root causes affecting the efficient use and the equitable distribution of land. This comprises a qualitative hypothesis building through a comprehensive literature survey as well as a quantitative hypothesis testing, employing quantitative analytical techniques. It also tries to identify the possible policy alternatives to overcome the current problems in the land sector.