How can you identify economic sector strengths and weaknesses?

It is an excellent measure of the performance of an industrial economy but terrible for a service dominant economy as the value of free software and customer input is not included

GDP indicate health of Economy of the Country & foreign +domestic investment momentum depend upon it by way of identifying the specific sector /s having growth opportunities .

GDP is certainly an indicate that how well or healthy the economy of a nation is.But GDP at Purchase Power Parity, Per Capita, Fiscal Deficit, Current Account Deficit, and Debt taken along with payment cycles are very important Macro & Micro parameters that defines how sound a nation economy is ? Inflation is a crucial parameter that determines how the growth percentage actually going to be.A Robust internal demand & supply is one single most important aspect that keeps the economy of a nation sustainable with its Structured Format that generates regular income through taxes to support social spending and on resilient infrastructure creation as needed for the nation and in providing an accountable governance.

I am a strong proponent of the Australian School's one of the most formidable axioms: the structure of capital, whether in terms of a state economy or an industry, is heterogenous, and not homogenous. Hence, no analysis based on the assumption of homogenous capital (aka. GDP or GNP based) driven haplessly by certain accounting concepts, in my opinion, can stand the test of time or reality because such assumption has always proven inadequate to appreciate the true nature of the complex interactions of functional presence/activities of the various actors (aka. entrepreneurs) operating in the different market levels.

While these metrics are valuable, they are not exhaustive. They might not capture nuances like sectoral vulnerabilities to external shocks, innovation rates, or long-term sustainability. Additionally, a sector's historical contribution to GDP might not necessarily predict its future potential, especially in rapidly changing economies.

Employment levels and wage levels are both “lagging economic indicators” of the economy and are reactive. They react to things that have already happened, irrespective of sector. For example, inflation has been “the” story since 2021 and the prices of products such as food, energy and medicines have rocketed for various reasons. This meant inflation rose for “goods”. A year or so later, we are now seeing wages increase as workers demand a pay rise to compensate for increasing “goods” inflation. So wage levels do not determine the health of any sector or economy. Likewise, employment levels react to future growth prospects and past monetary policy decisions. If interest rates rise, companies may lay off people as growth prospects fall.

Estimate Per Capita income through GDP approach has a partial correlation with GDP growth becoz PCI data is evaluated total value addition interms of rupees divided by midvalue population total of corresponding year.Hence if PCI goes down indicate less value addition ndicate less employment on the contrary if PCI data goes high it indicate higher productivity -higher employment size.

The quality employment, adequate employment and competetive wages for the jobs available in formal as well as in informal sector.The push to Entrepreneurship, startups, MSME, and small jobs creation with collateral free loans are back bone of an economy.All the sectors with adoption of emerging technologies and with befitting skilling is fetching good quality jobs with handsome remuneration.So, new skills are emerging such as Cyber Security, Data Science, Data Analytics & Management, Generative AI , Chat GPT & Useful AI,VR /AR, Quantum Computing, Chips designing, Robotics, Nano Electronics, Drones / UAVs, Blockchain etc are some areas that have an edge to fetch better wages and sky is the limit.

A sector that's growing fast will often have wages that rise faster than the rate of inflation, a large number of job openings, and growing overall employment. But there are exceptions to all of these. Rising wages may indicate that a job has become riskier or less desirable, so people have to be paid more to do it. A large number of job openings can signify workers' exodus from a sector for similar reasons. And sometimes a sector can grow even as employment drops, like manufacturing the United States as it adopted automation in the second half of the 20th century. An early indicator of growth in a sector is an increase in temporary or flexible workers who are not replacing permanent employees. This is usually a response to new demand.

High employment in a declining sector might indicate over-reliance, making the economy vulnerable to shocks affecting that sector. Similarly, high wages might not always denote sectoral strength; they could be due to union pressures or regulatory mandates.

While a high market share is often seen positively, it can also raise concerns about monopolistic behavior, reduced consumer choice, and potential regulatory scrutiny. Similarly, excessive profitability might be questioned if it results from exploitative practices or lacks reinvestment into innovation and growth.

Market share is variable depend upon global /domestic economic scenarios whether the economy of the country is under bleak or glittering /either affected economic growth affected due to recession,Inflation ,deflation, wealth concentration etc or Economy has been booming day by day.All these factors dominate the quantum of market share consequently signify rank of market share in global economic position .

Some sectors are undergoing transformational changes as Automobile Sector as EVs are needed for climate change.But green h2o , and hybrid technologies are pushing this sector rapidly and so is aviation sector.But I would like to say that it depends on nation to nation as they have different priorities and their policies as per their governance system and revenue generation to support.If I take India example as of now than all the sectors that Manufacturing, services, retail and agriculture, infrastructure creation such as highways, trains, aviation, defence Manufacturing, digital payments, DPI ,all are equally competetive and each sector is contributing in nation growth.So, push is given to Manufacturing to increase its share in GDP.

Another way linked to profitability is to measure the share of economic sector income as part of GDP. You will be able to measure the fluctuations between periods and conclude about strengths and weakness relatively to other sectors

Sectors tend to grow in macroeconomic waves - for example the Technology sector since 2009. The next decade may be a different sector like Commodities or Mining. Then Technology may return in the 2030’s. A great way to measure this is the annual growth rate vs GDP. If it outperforms GDP, then the sector contributed more than other sectors in the last 12 months. What typically happens is that sectors outperform for a number of consecutive months as part of this larger macro trend.

The role R&D and innovation play in the economy is becoming more and more prominent. However, this will further widen the inequality gap between countries. Strong economies, the front runners who have already spent a lot on R&D will reap the benefits of their investments, while the less developed countries will fall further behind. This is why policy makers in the less developed countries need to understand that capacity building and investing in human capital is not a luxury but rather a necessity for countries to be able to survive in this highly dynamic world.

R& D has a great value for building up economy of country by way of innovation /modifications of new/running products according to lifecycle of the product which inturn generate foreign /domestic demand & thereby escalate the quantum of value addition thus increased GDP growth &rebuild the health of Economy to remain on solid pave.

R&D facilities in each sector is meant for constant innovation that results in growth, being competetive, does adoption of technology, serve the people that is social cause.So, sectors R&D back up is must to scale, be competetive at Global level, in quality & cost. Indian Defence Manufacturing supported by a sound DRDO back is an example.For next level of IT revolution along with AI & Quantum Computing,the data centres are comming up and R&D centres and that has helped India able to lead the world in digital payments with UPI.The PLI scheme is supporting now many sectors to innovate in design & manufacturing especially in Semiconductors, mobiles and nano-electronics and also high-end electronics, pharmaceutical & automobile industry.

I would also look at KPI’s such as: new entrants to the sector, R&D as a % of Total Income, any grants available from the Governments to push a certain sector like electric vehicles, planned capital expenditure as a % of total income for the next 5 years. All these things will tell us how companies intend to behave in the coming few years.

Innovation and R&D play a pivotal role in shaping economic sector strengths and weaknesses. Effective innovation can bolster a sector's competitiveness, create high-value jobs, and stimulate economic growth. Conversely, inadequate R&D can lead to weaknesses, hindering a sector's ability to adapt, innovate, and remain globally competitive. Furthermore, investment in innovation and R&D is crucial but has to be well planned and budgeted. A failed Innovation or a wrong investment in any R&D may be fatal, both commercially and technically.

Estimation of GDP is a stupendous task invoving huge data base & the collection &purification of raw data requires skill manpower /machinery which act as a hinderance to get done efficient estimate .As a result of which decisions makers suffer from derieving optimal decisions making & economy may take wrong route.I think this may be regarde as a limitation for economic growth.

A simple SWOT analysis, where you list the Strengths, Weaknesses, Opportunities and Threats, is not a bad way to begin. In making the list, you should look at the linkages of the sector, forward and backward, eg. is it dependent on scarce raw materials? Is it dependent on just a few markets? And look also at the make-up of the sector: is it dominated by one or two companies, or are there lots of firms involved? If so, are they clustered, where labour mobility and cross-fertilisation are more likely? Market analysis can take you farther: is the sector mainly catering for the domestic market, or has it achieved international competitiveness and is focused on world markets? And is it competing on price, or on quality and innovation?

Each sector has its challanges as they keep emerging with time. Technology, man power available and government policies, and encounter some limitations.So, here lies the responsibility of the governance to solve such challanges and a sector also through many ways as traing manpower skilling & reskilling them, innovating with R&D and adoption of technology. Wages & facilities to the stake holders involved in a particular sector is very crucial to not only survive but also to remain competetive over a large period of times and also all the times.At present Climate Change & Sustainability are serious issues so the sectors needs to have ESG compliances in place and also to impliment DEI policies as it helps them to be sustainable.

General macroeconomic trends across countries like population growth and technology adaptation, immigration, the Government agendas on things like climate change / electric vehicles, and how this all fits into the business cycle - all need to be taken into account. Different countries will be at different points of the curve and it all fits into one big picture. Sectors will generally correlate across countries.

GDP has no relevance in India Sustainable Economic Development and Happiness Quotient, and not GDP, are the real measure of a progressive country My dream of India is that the poorest of the poor has some amount of surplus earnings after taking care of the needful expenses, to save for the future uncertainty. Similarly of a few become Trillionares and billionaires and majority of Indian's earning on the threshold the below poverty line as per the World Bank's Povertline report. An 5 Trillion Dollar Economy without up lifting everyone above Internationally accepted Poverty Line is no development at all.,many feel. India stood at 117 th position among 140 countries on Happiness Index.

GDP playes an important role but as I said earlier that now we need to move towards GHI-Gross Happiness Index. Poverty handling as well as addressing growing Inequality are important issues.How to bring people devoid of amenities for leading a happy life are important issues for a country. So, we need to stop blind utilisation of resources, follow circular economy and practice Yoga & consumption of healthy food and making all the sectors compliant with SSGs is way forward.