HPAS/Allied Mains 2022 Answer Writing Challenge Day 175 : Model Answer

QUESTION: What is sectoral composition of an economy? Is it necessary that service sector should contribute maximum to GDP of an economy? Comment. (8 marks/120 words)

Answer:

As per IMF’s latest World Economic Outlook projections, India’s real GDP projected to grow at 9 percent in 2021-22 and 2022-23 and at 7.1 percent in 2023-2024, which would make India the fastest growing major economy in the world for all 3years.

Sectoral Composition

The GDP consists of various sectors namely agriculture sector, industrial sector and service sector or Primary, secondary and Tertiary respectively. The contribution made by each sector of the economy to the GDP of a country is termed as sectoral composition. It gives the share of agriculture sector, industrial sector and service sector in India.

Primary Sector

• The primary sector in India is the sector which is largely dependent on the availability of natural resources in order to manufacture the goods and also to execute various processes.
• The services in this sector are entirely dependent on the availability of the natural resources in order to keep the day-to-day operations running.

Secondary Sector

• The secondary sector in India is responsible for the creation of the finished usable product.
• This sector depends predominantly on the primary sector for the procurement of raw materials for use in the process of product creation.

Tertiary Sector

• The largest contribution to India’s GDP comes from the tertiary sector.
• The tertiary sector is interchangeably called the service industry as it provides services to all the existing businesses and the final consumers.
• Examples of services can vary from distribution, transport, and good’s sale from the producers to consumers, as well as retailing, wholesaling, and even services like information technology, insurance, banking, transport, entertainment, etc.

According to the Economic Survey 2021-22, Agriculture and allied sectors expected to grow by 3.9 percent; industry by 11.8 percent and services sector by 8.2 percent in 2021-22.

It is necessary that at the later stages of development, service sector should contribute the maximum to the total GDP. This phenomenon is called Structural Transformation. This implies that gradually the country’s dependence on the agricultural sector will shift from the maximum to minimum and, at the same time, the share of industrial and service sector in the total GDP will increase. This structural transformation together with the economic growth is termed as economic development.