Structural Transformation in South Asia: Does the Pattern Ensure Growth Momentum?

We model the evolution and determinants of shares of agriculture, manufacturing and services to gross domestic product for four South Asian countries (Bangladesh, India, Sri Lanka and Pakistan) for 41 years (1974–2018) to understand their structural transformation pattern. Determinants of shares were classified into three broad categories: ‘country fundamentals’, ‘policy’ and ‘decadal dummies’. This is the first article to investigate the empirical regularities of the structural transformation pattern and their determinants for this region. The generalized least squares estimation technique for panel data was applied. We find mixed evidence in support of structural transformation. With the increase in per capita income, the share of agriculture decreases and that of services increases, partially supporting the Kuznets hypothesis; however, the share of manufacturing sector shows a more tepid rise and even decreases in some model specifications. Thus, the Kuznets model of structural transformation is supported to some extent, but not strongly for these countries.