Tertiary Sectors are and how they can Show the

Progress of the Economy in Bangladesh Comments

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BANGLADESH
What is GDP Primary,
Secondary and Tertiary Sectors
are and how they can Show
the Progress of the Economy in
Bangladesh
by rasel April 19, 2014 0 Comments
What does the GDP tell us about the economy?
A simple measure of the total output produced in an
economy is its Gross Domestic Product or GDP.
This is the sum of the value added in all the
different sectors of an economy over the course of
a year.
The composition of the gross domestic product
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
share of the primary sector (agriculture, fishing and

mining), 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 economics become more
developed.
What is the primary sector?
Economists define the primary sector as the
economic activities that involve using natural
resources. These activities include agriculture,
fishing and mining.
The most basic economic societies are largely
involved in primary sector activities as these
activates 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.
Some economies are also lucky to have large
deposits of minerals or oil, and these economies
can get rich for a time by selling the products of
their primary sectors as long as supplies last.
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 pop8ulation 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.
What is the secondary sector?
The secondary sector consists of activities that
process and manufacture products. These activities
include manufacturing and construction of all types.
Manufacturing can use natural inputs form 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 produced by the total
economy.
However, when economics 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 economics

as the economy became richer.
The starting point for East Bengal in 1947: mainly
agricultural
When Bangladesh became independent of British
colonial rule in 1947, it was initially as East
Pakistan, the eastern wing of the new state of
Pakistan. East Pakistan was carved out of the
British Indian provinces of Bengal and Assam, and
consisted largely of the poorer, eastern parts of the
province of Bengal, which were mainly agrarian.
The industrial base of Bengal during the British
period was around Calcutta, and this was lost by
East Pakistan when Bengal was divided as are slut
of the partition of 1947. Thus not only was Bengal
poor during the British period, the eastern part was
particularly underdeveloped as it was largely
agricultural and it supplies rice and raw materials
(such as jute) for the industrial belt near Calcutta.
How did this compare with West Pakistan and
India?
When this agrarian part of Bengal became part of
the new state of Pakistan, it started with an
exceptionally low share of manufacturing industry in
the total value of production in the economy.
West Pakistan was also largely non-industrial and

supplied cotton and wheat for industries located in

Western India. Most of the industrial base of British
India was in the parts that remained in India after
the 1947 partition, and so the share of
manufacturing and industry in India was higher than
in either East or West Pakistan.
However, while both East and West Pakistan were
both underdeveloped in terms of industry East
Pakistan was more agrarian than West Pakistan
and the share of the secondary sector was even
smaller in East Pakistan. The shares of the three
sectors in India, West Pakistan and East Pakistan in
1950.
Faster industrial growth in west Pakistan
Subsequently the economic development of east
and West Pakistan diverged for number of reasons.
Most of the Muslim traders and merchants who
migrated from Indian to Pakistan in 1947 took up
residence in West Pakistan.
In addition the government of Pakistan was
dominated by West Pakistan the West Pakistan and
government assistance was biased toward
industrialists in West Pakistan. The result wasthat
industrial growth was much faster in West Pakistan
compared to East Pakistan.
Consequently, although ther share of the secondary

sector increased in East Pakistan, it remained

behind West Pakistan interms of the degree of
industrialization. We can see this by cmparign the
sectoral composition of GNP in the two wings of
Pakistan n 1970.
Growth of the industrial and service sector in
Bangladesh
After independence, the growth of the secondary
sector accelerated in Bangladesh, particularly in the
1980s. We can see this by looking at the changes in
the pectoral composition of GDP in Bangladesh
since independence in the following table.
In the last two decades, Bangladesh has been
remarkably successful in the development of new
manufacturing activities, especially the garments
sector, processed foods, pharmaceuticals,
cosmetics and processed foods.
The service sector has also expanded with the
growth of telecommunications, transportation, and
financial services. But the service sector is still
dominated by low value-added services.