GDP or Gross Domestic product is a simple measure of the total output produced in an

economy. This is the sum of the value added in all the different sectors of an economy over
the course of a year.

If we look into the composition of the gross domestic product, it gives us further information
about the structure of the economy and its level of development. One way of breaking down
the GDP of a country is to look at the share of the primary sector (agriculture, fishing), the
secondary sector (industry, manufacturing and construction), and the tertiary sector
(services) in GDP. This is a particularly interesting way of looking at the composition of GDP
since the shares of these sectors change as economies become more developed. However,
we should discuss about the sectors first.

Primary Sector (crops, forestry, livestock and fisheries)

Economists define the primary sector as the economic activities that involve using natural
resources. These activities include three sectors: (i) Crops and Horticulture, (ii)
Animal Farming, and (iii) Forest and related services. The most basic economic
societies are largely involved in primary sector activities as these are the most
essential for human survival.

While the products of the primary sector are vital for survival, they are generally not very
valuable products. Economies cannot get rich simply by producing agricultural
products unless the country has a lot of land and can mass-produce agricultural
products using mechanization. However, in general, primary sector activities are
limited in scope and it is very difficult to raise productivity in this sector without the
development of mechanization.

Moreover, as the per capita income (the average income of a country) rises, the demand for
agricultural products generally grows at a much slower rate because there is a limit to
how much agricultural products each individual can consume. Countries generally
become richer by moving from agricultural production into manufacturing, and as the
population gets richer, they demand the consumption of a greater proportion of
manufactured products. In general, we would expect that as an economy becomes
richer, the value of output of the primary sector would decline as a share of the value
produced by the whole economy.

Secondary Sector (manufacturing and construction)

The secondary sector consists of activities that process and manufacture products. The
broad industry sector comprises of (i) mining and quarrying, (ii) manufacturing, (iii)
electricity, gas and water supply and, (iv) construction. Manufacturing can use natural
inputs from the primary sector, but can also use intermediate manufactured products
from other manufacturing sectors as inputs.

As economies become more productive, the share of the secondary sector in the total value
of output produced by the economy increases. This is because manufacturing makes
products that are more valuable than the products of the primary sector. Thus if
economies are to become richer, they have to produce a greater share of
manufactured products. At the same time, as incomes increase, the demand for
manufactured products also increases. This means that as countries become richer,
they are likely to be producing more manufactured products, and their populations
will demand a greater share of manufactured products in their consumption. We
would expect that as an economy becomes richer, the value of the output of the
secondary sector would increase as a share of the value produced by the total
economy.

Tertiary Sector (Service)

Finally, the tertiary sector is the service sector. Total output of the services sector consists of
the collective outputs of the wholesale and retail trade; hotel and restaurant;
transport, storage and communication; financial intermediations; real estate, renting
and business activities; public administration and defense; education; health and
social work, and community, social and personal services activities.

The share of the service sector in rich and poor countries is more complex. Very poor
countries can have a large service sector because the absence of manufacturing
jobs can force poor people to seek incomes in low productivity services such as
domestic service or rickshaw pulling. As the economy becomes richer, many of these
people will move out of these low value services into secondary sector jobs such as
manufacturing or construction. Thus, initially economic development can result in a
decline in the value of the output of the tertiary sector as a share of the total value
produced by the economy.

However, when economies become very rich, the value produced in the service sector can
rapidly increase as a share of the total value of the economy as labor shifts into very
high-value services such as advanced financial services, medicine, higher education
 and research. But we would expect most service-sector activities in poor economies
to be low value services. We would therefore expect the service sector to decline in
value in most poor economies as the economy became richer.

Table 1: Contribution of three sectors in GDP of Bangladesh (1941- till now)

Period Agriculture Industry Service Total

1941-1950 70.00% 4.00% 26.00% 100.00%
1951-1960 62.00% 5.00% 33.00% 100.00%
1961-1970 56.00% 9.00% 35.00% 100.00%
1971-1980 47.00% 10.00% 43.00% 100.00%
1981-1990 36.00% 11.00% 53.00% 100.00%
1991-2000 25.00% 15.00% 60.00% 100.00%
2001-2009 20.27% 28.87% 50.86% 100.00%

Source: Bangladesh Bureau of Statistics; Nahar, K. (2006). An Analysis of Growth Trend

and Changing Structure of GDP in Bangladesh.

Contribution in GDP (2001-2009)

Service
51% Agriculture
20%

Industry
29%
Figure 1: Sector Contribution in GDP (2001-2009)

Trend in Sector Contribution (1941-2009)

100%
90%
80% Service
70%
Percentage (%)

60%
50% Industry

40%
30%
Agriculture
20%
10%
0%
1941-50 1951-60 1961-70 1971-80 1981-90 1991-2000 2001-09

Decades
 Figure 2: Trend for Sector Contribution in GDP of Bangladesh (1941-2009)
During 1941-50, agriculture was the dominant sector in contribution to GDP, but changes
have come over the years and service sector has become conspicuous now. In the period of
1941-50, agricultural contribution to GDP was 70%. During 1951-60, share of agriculture in
GDP started to fall and it continued until now. In present decade, it is almost 20%.

In 1941-50, industrial establishments were poor because of the historical background. Under
British rule, governments did not give proper attention in the establishment of necessary
industries in East Bengal. After the separation of Indian sub-continent in 1947, the Pakistani
government was rather more eager to set up industries in West Pakistan than in the East.
So, though industries were growing and their contribution was rising, it could never be very
significant before independence of Bangladesh and agriculture remained the dominant
sector in GDP percentage. But, after long twenty years, industry showed improvement in
contribution to GDP in 1961-70, comparing with that of year 1941-50. Industrial share in
GDP percentage remained stagnant for some years from year 1971-80 to year 1981-90. The
growth of this sector started in 1990-91, when political environment was relatively stable and
foreign investment was appreciated and welcomed by the then government. In 2001-2009,
its contribution rose to 29%, it overtook contribution of agriculture.

In 1941-50, service sector had 26% contribution to GDP. This share of this sector grew from
the following fiscal years and this growth was stagnant for the latter two decades. But soon it
grew fast and reached 60% of GDP in 1991-2000, making this sector the largest of all in
GDP contribution. In present decade, it falls slightly but still contributes half of total GDP.

This structural transformation of GDP of Bangladesh reflects the positive trend of industry
sector both in terms of share and growth. By analyzing the sector growth rate within this
period, it is observed that industry sector shows significant success in increasing growth
compared to agriculture and service sector.

Now we will compare sector composition of GDP for seven countries. Countries are selected
from different categories-
1. Developed country (USA),
2. Developing country (Brazil),
3. Middle-east country (Saudi Arabia),
4. Emerging economy (China),
5. SAARC country (India),
6. Least developed country (Burundi) and
 7. Bangladesh.

Country Agriculture Industry Service GDP - PER CAPITA

USA 1.20% 21.90% 76.90% $46,400
Saudi Arabia 3.20% 60.40% 36.40% $20,300
Brazil 6.50% 25.80% 67.70% $10,200
China 10.90% 48.60% 40.50% $6,500
India 17.50% 20.00% 62.60% $3,100
Bangladesh 18.7% 28.70% 52.60% $1,600
Burundi 33.30% 21.00% 45.80% $300

Table 2: Sector Composition in GDP of Selected Countries and GDP per Capita

Source: https://www.cia.gov/library/publications/the-world-factbook/geos/us.html

Sector Composition of GDP for Selected Countries

90.00% $46,400 $50,000
80.00% $45,000
70.00% $10,200 $40,000
$20,300 $3,100

GDP per Capita

Percentage (%)

60.00% $35,000
$1,600
$6,500 $30,000
50.00% $300
$25,000
40.00%
$20,000
30.00% $15,000
20.00% $10,000
10.00% $5,000
0.00% $0
na

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A

nd
i

di
az

es
ab
US

In
Ch

ru
Br

ad
Ar

Bu
l
ng
i
ud

Ba
Sa

Agriculture Industry CountryService GDP - PER CAPITA

Figure 3: Comparison of GDP per Capita with Sector Composition

GDP per capita is the value of all final goods and services produced within a nation in a
given year divided by the average (or mid-year) population for the same year and this
amount is higher in developed countries. From the table and graph, we see that agricultural
composition is high in basic economy i.e. least developed countries. For USA, agricultural
contribution is 1.20%, where for China, the value amounts to 10.90% and for Burundi, it is
33.30%. From this, we understand that reduction of agricultural contribution in GDP and
increase in share of other sectors (industry, service) lead to a higher GDP for a country. This
tendency results in higher GDP per capita and the specific country moves towards the zone
of developed countries.