India since the 1970s: services lead output, agriculture still holds the jobs

Detail

A. Key terms used in this section

• Primary sector: activities that use natural resources directly, such as agriculture, forestry, fishing and mining.
• Secondary sector (industry): activities that turn raw materials into goods, such as manufacturing, construction, and electricity, gas and water supply.
• Tertiary sector (services): activities that produce services, not goods, such as trade, transport, banking, education, health and IT.
• GVA (Gross Value Added): the value of output minus the value of the inputs used to make it. Sector shares of the economy are measured on GVA.
• Formula: GVA = Value of output − Value of intermediate consumption

• Example: a baker sells bread worth ₹1,000 and used flour and fuel worth ₹600. GVA = ₹1,000 − ₹600 = ₹400.

• Workforce share: the percentage of all workers whose main work falls in a sector.

• Structural transformation: as an economy develops, workers and output move from agriculture to industry, and then to services.

B. Output: services became the largest sector (Class 10 Graphs 1-2, 1977-78 vs 2017-18)

• All three sectors grew over these 40 years, but the tertiary sector grew the most.
• In 2017-18, tertiary replaced primary as the largest producing sector. Its GVA share was in the 50-60% band (Class 10 exercise 2d).
• Services' GVA share rose from 50.6% (FY14) to 55.3% (FY25) (Economic Survey 2024-25) [2].
• Services' GVA share reached a record 56.4% in FY26 (First Advance Estimates, Economic Survey 2025-26) [3][4].

• Services GVA grew 9.1% in FY26, up from 7.2% in FY25 [3][4].

• Approximate current structure: agriculture about 16-18%, industry about 26-28%, services about 55-56% of GVA [2][3]. (NCERT: services "about 55%", verify current.)

C. Why services grew: four reasons (Class 10)

1. Basic services - These are services every country needs: hospitals, schools, post and telegraph, police, courts, village administrative offices, municipal bodies, defence, transport, banks and insurance. - In a developing country, the government must provide them, because private firms will not reach every village.

2. Derived demand (demand for one thing that comes from demand for another) - More farms and factories → more goods to move, sell and store. - → more demand for transport, trade and storage.

3. Income-elastic demand - Income elasticity of demand measures how much demand for a good changes when income changes. - Formula: Income elasticity = % change in quantity demanded ÷ % change in income - Example: incomes rise 10% and spending on eating out rises 20%. Elasticity = 20 ÷ 10 = 2. A value above 1 means a "luxury", and demand for it grows faster than income. - As incomes rise, people spend more on eating out, tourism, shopping, private hospitals, private schools and professional training. This is most visible in big cities.

4. New services based on ICT (information and communication technology) - IT-enabled services include software, call centres, data entry and accounting. - They grew fast and are exported. - The model has moved from software and BPO (business process outsourcing: doing office work for foreign firms) to today's Global Capability Centres (GCCs). These are offices that multinational firms own and run in India to do their own technology, research and analysis work.

D. Caveat: the service sector has two faces

• Top end: a few highly skilled, well-paid jobs in IT, finance and consulting.
• Bottom end: very large numbers of small shopkeepers, repair persons and transport workers who "barely manage to earn a living".
• They do this work because no other work is available.
• So only part of the service sector is truly growing. A high services share does not by itself mean good jobs.

E. Service-led growth and exports

• After 1991, India's growth has been driven mainly by services.
• China's growth was manufacturing-led (see india-china-pakistan and lpg-reforms-1991).
• Services exports reached a record US$387.5 bn in 2024-25, up 13.6% from US$341.1 bn in 2023-24 (RBI data) [5]. (NCERT scaffold: "about US$387 bn", confirmed.)
• India is the world's 7th-largest exporter of services. Its share of world services trade more than doubled, from 2% (2005) to 4.3% (2024) [3][4].

F. Employment: the shift that did not happen

Sector	Output growth (1977-78 → 2017-18)	Employment growth
Industry	>9 times	≈3 times
Services	14 times	≈5 times

• Worked example: output per worker (labour productivity)
• Formula: Output per worker = Output ÷ Number of workers
• Services: output ×14, jobs ×5 → output per worker rose about 14 ÷ 5 = 2.8 times.
• Industry: output ×9, jobs ×3 → output per worker rose about 3 times.

• Meaning: output grew much faster than jobs. Growth created fewer new jobs than it could have.

• Result: more than half of workers were in primary, mainly agriculture, and produced only about one-sixth of GVA.

• Worked example: relative productivity (2023-24)
• Agriculture has about 46% of workers but only about 16-18% of GVA → 17 ÷ 46 ≈ 0.37. An average farm worker produces about one-third of the economy-wide average per worker.
• Services have about 30% of workers and about 55% of GVA → 55 ÷ 30 ≈ 1.8 times the average.

G. Underemployment and disguised unemployment

• Underemployment: people work, but below their full capacity or for fewer days than they could.
• In agriculture, more people work than the work needs. If some moved out, output would not fall.
• Disguised unemployment: a hidden kind of unemployment. People appear to be working, but their marginal product (the extra output from one more worker) is zero.
• Example (Laxmi): her family of five all work her 2-hectare unirrigated plot growing jowar and arhar.
• Everyone is busy, but no one is fully employed.
• If two members left for other work, the harvest would stay the same. Those two are disguisedly unemployed.
• Full treatment: employment-informal-sector.

H. Workforce shares over time (Class 11, Employment chapter, Table 6.3, %)

Sector	1972-73	1983	1993-94	2011-12	2023-24
Primary	74.3	68.6	64	48.9	46.1
Secondary	10.9	11.5	16	24.3	24.1
Services	14.8	16.9	20	26.8	29.8

• Over about 50 years, the primary share fell by about 28 percentage points (74.3 → 46.1). Industry and services took up that share.
• Latest data: PLFS Annual Report 2025 (calendar year, released 27 March 2026) [7][8]
• Agriculture's share of workers fell from 44.8% (2024) to 43.0% (2025).
• Manufacturing rose from 11.6% to 12.1%. Construction fell slightly, from 12.3% to 12.0%.
• Trade, hotels and restaurants rose from 12.5% to 12.9%. Transport, storage and communication stayed at 5.8%. Other services rose from 12.2% to 13.1%.
• Broad-sector totals for 2025 (worked out from these shares): primary (agriculture 43.0 + mining 0.3) ≈ 43.3%; secondary (12.1 + 0.7 + 12.0) ≈ 24.8%; services (12.9 + 5.8 + 13.1) ≈ 31.8% [7].
• Method change: from 2025, PLFS moved from the July-June (agricultural year) cycle to the January-December (calendar year) cycle, to match international practice [7]. So "2023-24" and "2024" figures cover different periods and should not be compared exactly.

I. Rural, urban, male and female splits (Table 6.2, 2023-24, %)

	Rural	Urban	Male	Female	Total
Primary	59.8	6.7	36.3	64.4	46.1
Secondary	21.4	32.4	28.8	15.6	24.1
Services	18.8	60.9	34.9	20.0	29.8

• Reading the tables:
• Rural India lives off farming (about 60%).
• Urban India lives off services (about 61%).

• Women are far more concentrated in agriculture (64.4%) than men (36.3%).

• Labour context, PLFS July 2023-June 2024 (usual status ps+ss, age 15+) [6]:

• LFPR (labour force participation rate: share of people who are working or looking for work) = 60.1%. Male 78.8%, female 41.7%.
• WPR (worker population ratio: share of people who are employed) = 58.2%. Female WPR rose from 35.9% (2022-23) to 40.3% (2023-24).
• Unemployment rate = 3.2% for both men and women.

• Usual status (ps+ss): a person's activity over the last 365 days. Principal status (ps) is the activity on which the person spent most time. Subsidiary status (ss) is extra economic work done for 30 days or more in that year.

• The large rise in female participation came mostly from rural women. This is why the farm share of workers stayed high.

J. NCERT errors and outdated points

• Repeated figure: Table 6.3 repeats 46.1 as the primary share for 2017-18. PLFS 2017-18 put agriculture at about 44% (verify).
• Outdated summary: the chapter's summary still says "three-fifth" of the workforce depends on agriculture. Its own 2023-24 data shows 46.1%, which is under half. The latest data shows 43.0% in 2025 [7].

K. The "reverse structural transformation" debate

• What happened: after 2018 the farm share of workers rose back towards 46%. This reverses the normal pattern of development.
• Two debated reasons:
• COVID reverse migration: workers who lost city jobs in 2020 went back to their villages and farms.

• More women counted in farm work: many more rural women were recorded as unpaid helpers or self-employed on family farms.

• Recent trend: agriculture's share fell again, from 44.8% (2024) to 43.0% (2025), while manufacturing's share rose [7]. This suggests the reversal may be easing, but one year's data is not enough to be sure.

Prelims Hooks

• Services' share of GVA: 50.6% (FY14) → 55.3% (FY25) → 56.4% (FY26 advance estimates), a record high [2][3].
• India's services exports were US$387.5 bn in 2024-25, up 13.6%. India is the 7th-largest services exporter, with a 4.3% share of world services trade in 2024 [3][5].
• Workforce share of the primary sector: 74.3% (1972-73) → 46.1% (2023-24). Agriculture's share of workers was 43.0% in 2025 (PLFS) [7].
• In 2023-24, the primary sector employed 64.4% of women workers but only 36.3% of men. It employed 59.8% of rural workers but only 6.7% of urban workers.
• Under Class 10's data, tertiary overtook primary as the largest producing sector. Primary is still the largest employing sector. This contrast is a common trap.
• Disguised unemployment means the marginal product of labour is zero. It is most common in agriculture.
• Usual status (ps+ss) uses a 365-day reference period. Subsidiary status needs 30 days or more of economic work [6].
• From 2025, PLFS annual reports follow the calendar year (January-December), not July-June [7].
• The "income-elastic" reason for services growth means income elasticity is above 1, so demand grows faster than income.

Mains Points

• Jobless-type growth and the productivity gap: from 1977-78 to 2017-18, services output grew 14 times but jobs only about 5 times. About 46% of workers produce about 17% of GVA, so average output per farm worker is about one-third of the economy-wide average. Moving workers into labour-intensive manufacturing (textiles, food processing, construction) and into skills-based services is central to making growth inclusive.
• Service-led vs manufacturing-led growth: India's services exports (US$387.5 bn in 2024-25) and GCCs show real strength [5]. But the high-skill part employs few people, while most services workers are low-earning small traders and transport workers. Unlike China's factory-led path, services cannot absorb India's large low-skilled workforce by themselves. This supports schemes such as PLI (production-linked incentives), and supports reforms in labour, logistics and MSMEs (micro, small and medium enterprises).
• Reverse structural transformation and gender: the farm share rose after 2018. This came from COVID-era return migration and more rural women counted as unpaid or self-employed farm workers. So a rising female LFPR (41.7% in 2023-24) does not automatically mean better jobs for women [6]. The fall in agriculture's share to 43.0% in 2025, with manufacturing rising, needs to be sustained before it can be called a real recovery of structural change [7].
• Two-faced services sector and policy: the government must keep providing basic services (health, education, policing) in poorer areas. Urban informal services need social security (e.g. the Social Security Code, e-Shram), easy credit and skilling, so that "no alternative" jobs can become productive ones.