Normally countries shift from agriculture to industry and then later to services, but India shifted directly from agriculture to services. What are the reasons for the huge growth of services vis-a-vis industry in the country? Can India become a developed country without a strong industrial base?

Development theory expects economies to move from agriculture to manufacturing and then to services. India leap-frogged manufacturing, with services now contributing over half of GDP while industry stagnated near a quarter.

Reasons for the services surge

• Human capital: a large pool of English-speaking, technically skilled workers suited IT, ITES and business services.
• Post-1991 opening: liberalisation, the IT revolution and low capital-entry barriers let services scale rapidly.
• Global demand: outsourcing and the offshoring wave favoured Indian software and back-office services.
• Manufacturing constraints: rigid labour laws, poor infrastructure, land and credit bottlenecks, and complex regulation held industry back.

Can India develop without a strong industrial base?

It is difficult. Manufacturing is essential because it:

• generates mass, formal employment for the semi-skilled, absorbing surplus farm labour that services cannot;
• drives technological learning, productivity and export competitiveness;
• reduces import dependence and strengthens the current account;
• creates demand linkages across the economy.

Services alone are skill-intensive and cannot employ the millions leaving agriculture, risking jobless growth.

Conclusion

A services-led model has limits for a labour-surplus economy. India needs a manufacturing revival — the aim of Make in India, PLI schemes and labour and land reforms — to sustain broad-based, job-rich development.