Question 11 of 19intermediate🔍 AnalyzeLong Answer5 marks

What is sectoral composition of an economy? Is it necessary that the service sector should contribute maximum to GDP of an economy? Comment.

(i)
Answer

The Gross Domestic Product (GDP) of a country is derived from different sectors of the economy, namely the agricultural sector, the industrial sector, and the service sector. The sectoral composition of an economy refers to the contribution made by each of these sectors. These contributions collectively make up the structural composition of the economy.

(ii)
Answer

It is not necessary that the service sector should always contribute the maximum to the GDP of an economy. The context states that in some countries, growth in agriculture contributes more to GDP growth, while in others, the service sector contributes more. The dominant sector depends on the specific economic conditions of the country.

However, a general trend is observed where, as a nation becomes more prosperous, the proportion of GDP contributed by agriculture declines considerably. For instance, in India, the proportion of GDP contributed by agriculture declined significantly between 1950 and 1990. This suggests that while the composition shifts away from agriculture with development, it does not imply the service sector must be the maximum contributor in all cases.

Explanation

The answer is derived directly from the textbook's explanation of structural composition. Part (i) defines sectoral composition using the three main sectors identified: agriculture, industry, and services. Part (ii) addresses the 'necessity' clause by citing the text's explicit statement that different countries have different leading sectors (some agriculture, some services). It further elaborates using the text's observation that agriculture's share declines with prosperity, using the Indian context from 1950-1990 as evidence, while clarifying that this structural shift doesn't automatically mandate service sector dominance in every economy.