Contributors to GDP: Agriculture makes tremendous progress

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Offline Rozina Akter

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Contributors to GDP: Agriculture makes tremendous progress
« on: August 06, 2015, 06:27:55 PM »
he structure of the economy is conventionally divided into three sectors viz. agriculture, industry and services and these contribute to a country's gross domestic product (GDP). In the beginning of development it is agriculture which plays the dominant role in constituting GDP which is then taken over by industry as the economy progresses. At the third stage, service sector accounts for major share of GDP surpassing the other two. In practice, this sequence has not been followed in many countries, developed and developing, where the service sector has pre-empted the industries sector. This is true even for a lower middle-income country like Bangladesh. The movement in the shares of the sectors in GDP is an important indicator of the development of the sectors as well as of the economy.

According to available statistics, the contribution of agriculture to GDP in Bangladesh has declined fast. Using 2005-2006 as the base year the contribution of agriculture and forestry was 22.17 percentage compared to 12.41 percentage in 2013-14. The sub-sectors under agriculture also showed a downward trend during this period. The contribution of crops and vegetables came down to 8.83 percentage compared to 9.28 percentage in the previous year. Similar is the case with the second sub-sector livestock. Only the fisheries sub-sector has maintained the same rate of contribution to GDP, 3.69 percentage. This sub-sector made the maximum contribution to GDP in 2007-2008 when it accounted for 3.79 percentage of GDP.

The decline of agriculture's share in GDP is in line with the experience of other countries and therefore, not surprising. The decline in contribution to GDP does not, however, mean that agriculture is regressing and becoming moribund. It only implies that compared to other sectors its share in GDP has come down. In absolute terms agriculture has made tremendous progress. In cereals production Bangladesh has become more than self-reliant, enabling it to export rice and vegetables to other countries. The production of jute, the main cash crop, remains unchanged, though farmers do not always get fair price. Even for rice, the price offered is not always attractive.

In spite of the declining share of agriculture and its sub-sectors in GDP the importance of the sector remains paramount. First of all, it has to feed 160 million people for which cereal production has to grow steadily. If there is surplus over domestic requirement it offers an additional source of earning foreign exchange. Jute as the cash crop is the major foreign exchange earner of the sector. Of late, vegetable exports have picked up as its production has become commercial at the initiative of enterprising farmers. Frozen fish has enjoyed an important status as export item and its potential remains great. Recently, processed livestock products have also been exported, specially to the  Middle-East. In view of the role played domestically and in international market, agriculture sector's importance cannot be underestimated. Its declining share in GDP belies its role in the economy.

Though government provides support and services to the agriculture sector these are not adequate. The supply of inputs to the sector is often erratic and subject to manipulation by middlemen. The benefit of subsidy given does not always reach the stakeholders. Marketing and distribution of the products of the sector work against the interest of farmers, fishermen and others involved in the sector. One redeeming feature is that the private sector is increasingly getting involved in the marketing of agricultural product using modern processing technique. This has given rise to a vibrant agro-industry sub-sector establishing backward linkage with the agriculture sector. With further infra-structure development in respect of irrigation, transportation and marketing agriculture sector may thrive in absolute terms though its share in GDP may decline. What is important is not to downplay the importance of the role of the sector simply because of its declining share in GDP. In fact, through forward linkage with industries (agro-based) it can maintain a stable share in GDP.

During 2014-2015 the contribution of industries sector was modest. Among its sub-sectors minerals and mining's share in GDP was 1.65 percentage which is slightly higher than the contribution made by the sub-sector in the previous year. In manufacturing sub-sector the contribution to GDP rose slightly in 2014-2015, to 20.17 percentage from 19.47 percentage in the previous year. But the significant development in the sector has been the increase in contribution by middle and large industries which amounted to 16.52 percentage compared to 15.95 percentage in 2013-2014. These sub-sectors have been maintaining a steady growth since 2006-2007. Given necessary support this sub-sector has a bright future. Small industries sub-sector has also posted growth during this period. The increasing share of all the sub-sectors in the manufacturing sector in GDP is encouraging as it has to contribute at a higher rate to lift GDP from its present level around 6.0 per cent. Besides, it has to employ the bulk of labour force that is entering the market every year.

More than the agriculture sector the manufacturing sector is hamstrung by inadequate infrastructure and supply of gas and electricity. Bureaucratic red tapism also acts as a handicap. Access to credit on easy terms could encourage more entrepreneurs to invest more in this sector.

There is consensus that if Bangladesh economy has to attain a GDP growth rate above 6.0 per cent the investment in manufacturing sector has to rise from its present level. With higher percentage of GDP as investment the sector can help the economy to attain middle-income status and eradicate hardcore poverty. The manufacturing sector is directly affected by fiscal and monetary policies and as such these need to be dove-tailed to the need of the sector.

In the services sector, the performance of financial institutions was modest. Though banks and insurance companies contributed positively to GDP, their role in the development of other sectors, particularly manufacturing, has not been exemplary. There has to be greater integration among these sectors to reap the benefits of synergy. What is required is a concerted policy for these sectors.
Rozina Akter
Assistant Professor
Department Of Business Administration

Offline munna99185

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Re: Contributors to GDP: Agriculture makes tremendous progress
« Reply #1 on: August 12, 2015, 04:00:53 PM »
Thanks for sharing nice information

Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University

Md. Jakaria

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Re: Contributors to GDP: Agriculture makes tremendous progress
« Reply #2 on: September 03, 2015, 03:25:21 PM »
Effective information.