As India marks 80 years of Independence, its economy looks very different from the one it inherited in 1947. Agriculture once accounted for more than half of national output. Today, services are the biggest part of the economy, while agriculture has a much smaller share.
In 1950-51, agriculture and allied activities contributed about 53.1 per cent of gross domestic product (GDP), compared with 16.6 per cent for industry and 33.9 per cent for services. According to the Economic Survey 2025-26, services accounted for 51.1 per cent of GDP in 2025-26, while agriculture, livestock, forestry and fishing made up 15.2 per cent and industry 24.3 per cent.
The shift shows how economic activity has moved from farms towards manufacturing, construction and services such as finance, professional services, trade, transport and communications. But output has shifted much faster than employment, creating a major challenge of generating productive, better-paying jobs outside farming.
How agriculture’s share of the economy shrank
Agriculture’s output has grown substantially, but its share has fallen because other sectors expanded faster. MoSPI data show agriculture and allied activities accounted for 52.3 per cent of GDP at current prices in 1950-51. The share fell to 42.3 per cent in 1970-71, 29.3 per cent in 1990-91, 23.4 per cent in 2000-01 and around 18 per cent in 2010-11.
The decline continued, although the share has fluctuated with agricultural performance and relative prices. Latest national accounts estimates put agriculture, forestry and fishing at roughly 15 per cent of GVA. The Economic Survey’s long-run GVA data also shows the economy moving steadily away from agriculture.
This does not mean farms have become less productive. Rather, manufacturing, construction, trade, finance, real estate, communications and other services have grown much faster, creating more economic value outside farming.
Did India ever become a manufacturing-led economy?
Manufacturing expanded significantly after Independence, but its share did not rise enough to make it the main driver of structural change. According to the Economic Survey 2011-12, industry’s share of GDP rose from 16.6 per cent in 1950-51 to 25.9 per cent in 1980-81, before largely plateauing at 26-28 per cent. Manufacturing typically accounted for around 14-16 per cent of GDP during the post-reform period.
Manufacturing grew 10.1 per cent in 2005-06, 14.3 per cent in 2006-07 and 10.3 per cent in 2007-08. It slowed to 4.3 per cent in 2008-09 during the global financial crisis, recovered to 9.7 per cent in 2009-10 and 7.6 per cent in 2010-11, and slowed to 3.9 per cent in 2011-12. From 1991-92 to 2011-12, industry grew at an average 6.7 per cent a year, broadly in line with GDP growth of 6.9 per cent.
The bigger structural shift was towards services. Between 1980-81 and 2011-12, industry’s share remained broadly stable, while services rose from 38 per cent to 59 per cent of GDP. Agriculture’s share fell from 36.1 per cent to 13.9 per cent. India therefore moved from an agriculture-led to a services-led economy without manufacturing becoming the dominant bridge.
The rise of services
Services became India’s largest economic sector, overtaking agriculture in output share by 1990-91. Their share rose from about 30 per cent of national income in 1950-51 to around 43 per cent in 1990-91 and roughly half by 2000-01.
The sector has also changed. The Economic Survey groups services into trade, hotels, transport, communication, and broadcasting-related services; financial, real estate, and professional services; and public administration, defence, and other services.
Computer and information services, professional and business services, telecommunications and financial services have made the sector more skill-intensive and globally connected. The Economic Survey says digital, skill-intensive and infrastructure-linked services accounted for nearly 89 per cent of services FDI in recent years.
The big mismatch: Where India earns vs where Indians work
The transformation looks different when output is compared with employment. Agriculture, livestock, forestry and fishing accounted for 15.2 per cent of GDP in FY26, but agriculture employed 43.0 per cent of workers in 2025, according to the Periodic Labour Force Survey (PLFS). Agriculture therefore employed nearly three times the share of workers that it contributed to output.
Services show the reverse pattern. They contributed 51.1 per cent of GDP but accounted for only about 32 per cent of employment in 2025. The Economic Survey says their employment share rose from 22.1 per cent in 1992 to 30.0 per cent in 2022, but remains below their output share.
Industry is closer to balance. It accounted for 24.3 per cent of GDP in FY26. Manufacturing employed 12.1 per cent of workers in 2025 and construction another 12.0 per cent. Adding mining, utilities and construction puts the broader secondary sector at roughly 25 per cent of employment.
The Economic Survey also highlights a difference in job quality: 51.5 per cent of service workers were in regular wage employment, compared with 1 per cent in agriculture and 25.5 per cent in industry.
Why has the workforce transition been slower?
In 2025, 43 per cent of workers were still engaged in agriculture even though the sector accounted for only 15.2 per cent of GDP in FY26. Workers leaving farms have not moved mainly into manufacturing.
PLFS 2025 shows manufacturing accounted for 12.1 per cent of employment, construction 12.0 per cent, mining and quarrying 0.3 per cent, and electricity and water supply and related activities 0.7 per cent. Together, the broad secondary sector accounted for 25.1 per cent.
Services accounted for 31.8 per cent of employment, including trade, hotels and restaurants at 12.9 per cent, transport, storage and communications at 5.8 per cent, and other services at 13.1 per cent.
In 2023-24, agriculture accounted for 46.1 per cent of employment, down from 49.4 per cent in 2021-22. Construction accounted for 12.0 per cent and manufacturing roughly 11 per cent.
The data shows that construction and services have absorbed more workers leaving farms than factories. This is significant because manufacturing has traditionally been seen as a sector capable of absorbing large numbers of workers moving out of low-productivity agriculture. India’s experience has instead been a modest rise in manufacturing employment alongside larger gains in construction and services.
How much richer did Indians become?
The transformation was accompanied by a large rise in real income per person. Per capita Net National Income (NNI) at constant prices removes the effect of inflation and allows comparisons across decades.
Real per-capita income was therefore almost 9.8 times its 1950-51 level by 2025-26. Growth was modest in the early decades, accelerated from the 1980s and became stronger after 1991. The latest Economic Survey data shows per-capita NNI at constant prices grew at an average annual rate of 2.9 per cent in 2012-13, while the longer national accounts series shows acceleration in later decades.
The rise broadly tracks the structural change, but per-capita NNI is an economy-wide average and does not show what an average household earns or whether gains were evenly distributed across people and regions.
How did India become more globally connected?
India’s transformation also brought deeper global integration. RBI data show exports plus imports of goods and services rose from around 41 per cent of GDP in 1990-91 to more than 50 per cent before the global financial crisis. On a balance-of-payments basis, exports of goods and services rose from 5.8 per cent of GDP in 1990-91 to 14.0 per cent in 2006-07.
Professional, technical and business services grew rapidly in the late 1990s and early 2000s, while software and IT-enabled services became increasingly important. Between 1993 and 2022, services exports grew at a CAGR of more than 14 per cent, far outpacing merchandise exports.
In 2024-25, merchandise exports stood at $437.4 billion and services exports at $387.5 billion. Services grew 13.6 per cent and accounted for almost 47 per cent of combined exports, helping offset a large merchandise trade deficit.
At 80, India has moved far from an economy where agriculture dominated both output and employment. Services now drive output, but agriculture still supports a large share of workers. The unfinished challenge is to create enough productive non-farm jobs to absorb workers leaving farms and sustain India’s next phase of growth.
