Structural Transformation in South Asia

This paper models the evolution and determinants of the shares of agriculture, manufacturing and services to
GDP for 4 South Asian countries (Bangladesh, India, Sri Lanka and Pakistan) for 55 years: 1960-2014.
Determinants of these shares were classified into three broad categories “country fundamentals”, “policy” and
“decadal dummies. We find that with increase in GDP the share of services rises strongly whereas the share of
manufacturing has a more tepid rise with GDP whereas the share of agriculture falls in most cases. Land per
capita is positively associated with share of agriculture whereas arable land only weakly so. As capital and
power rise the share of agriculture drops wherever it appears whereas FDI negatively influences the share of
agriculture in one case. Share of manufacturing drops with rises in arable land, and rises with trade, capital and
power. The share of services falls with land per capita and rises with power. Other influences are largely
insignificant. The Kuznets model of structural transformation is supported to some extent.