Occupational structure refers to how the workforce is distributed across various sectors of the economy. As an economy industrialises, several predictable shifts tend to occur in the nature of employment, a trend supported by the extensive research of Simon Kuznets.
The share of the population dependent on agriculture typically declines over time. This shift corresponds with a proportional increase in non-agricultural employment.
The proportion of workers engaged in manufacturing and industrial activities tends to rise during this phase of development.
Manufacturing employment should ideally absorb a significant portion of the labour force exiting agriculture, especially in a balanced growth model.
Within manufacturing, there is usually a transition from household-based production to larger, non-household enterprises, which are more efficient and use advanced technology.
Employment in the services sector also grows, though initially at a slower pace than manufacturing. In more advanced stages of development, the services sector tends to grow more rapidly.
Rising income levels change consumption patterns. As incomes grow, people spend relatively less on food (agricultural products) and more on manufactured goods and services. This shift fuels demand in industrial and service sectors, generating more jobs outside agriculture.
Improved agricultural productivity due to better capital, technology, and methods reduces the need for labour in agriculture. Conversely, while capital investment in manufacturing increases output per worker, the demand for industrial and service products grows even faster, creating more employment opportunities.
Thus, industrialisation drives a systemic reallocation of labour from traditional agricultural jobs to more productive and better-paying roles in manufacturing and services, reshaping the economic landscape over time.
Table 1.2 presents a chronological distribution of India’s workforce across primary, secondary, and tertiary sectors. The data reveals a consistent decline in agricultural dependency and a slow rise in industrial and service-related employment.
Key figures from Census and NSSO data:
Primary sector: Declined from 71.7% in 1901 to 53.5% in 2009–10
Secondary sector: Increased from 12.6% to 20.9%
Tertiary sector: Rose from 15.7% to 25.6%
Projection: If trends continue, agricultural employment may drop below 50% within the next decade.
Despite development, nearly half of India's workforce remains reliant on agriculture, while the non-agricultural sectors employ less than 50%.
The first phase (1901–1971) showed minimal structural change. Post-1971, occupational distribution began slowly shifting in line with global industrialisation patterns.
Growth in sectors like education, health, science, communications, and transport indicates gradual economic modernisation, although at a limited pace.
Key insight: Cultivators fell from 53% in 1901 to 29.7% in 2004–05. Meanwhile, agricultural labourers increased from 14–17% to nearly 20% by 1991—signaling a move from self-reliant farming to wage-based dependency.
Kerala, Tamil Nadu, Maharashtra, and Bengal show declining agricultural employment, with growth in services and industry. In contrast, Rajasthan and Orissa exhibit rising agricultural reliance.
Pattern: High per capita income states (e.g., Punjab, Kerala, Maharashtra) show more non-agricultural employment. States with below-average income (e.g., Bihar, U.P., Rajasthan) remain agriculture-heavy.
Since 1950–51, the primary sector's share in NDP has fallen while secondary and tertiary sectors expanded—particularly services. Yet, these shifts are underrepresented in occupational employment data.
The composition of trade reflects an economy’s level of development. Underdeveloped countries (UDCs) typically rely on exporting a few Primary Commodities (PCs) while importing industrial goods. This results in a loss of value-added benefits and technological advancement.
As economies develop, trade structures diversify—exports shift from raw materials to manufactured products, and imports tilt toward capital goods, industrial inputs, and technology.
Manufactured exports generate greater value addition and have stronger linkages with the domestic economy than primary exports, leading to broader industrial and employment impacts.
Commodities can also be classified based on:
Shifts in commodity composition reflect deeper structural changes in income generation, industrialisation, and employment.
India’s exports can be broadly grouped into:
Share in total exports: Export-oriented manufactures – 64%, Domestic-oriented – 19%, Non-manufactures – 17%
This shows that manufactured exports now dominate India's export basket, reducing vulnerability to fluctuations in export quantum and unit value. For an industrialising country, this is a positive development.
Only 5% of India’s manufactured exports are high-tech. In contrast:
In 1984–85, two categories—textiles and garments, and gems and jewellery—accounted for about half of all manufactured exports. By 2011–12, they still formed close to 40% of the total.
This trend has dual implications:
Policy implication: India needs to diversify its export basket toward high-value, high-tech products to align with global trade dynamics.
The theory of demographic transition, formulated by Frank Notestein, explains population growth through three stages of economic development, forming an inverted-U pattern over time.
Applies to the most backward agrarian societies with no industrial development. Both birth and death rates are high.
High birth rates result from:
High death rates stem from poverty, malnutrition, poor sanitation, absence of medical care, and frequent epidemics. Population growth remains stagnant or very slow.
Resources begin to be utilised and industrial development starts. Birth rate remains high due to persistent customs and illiteracy, while death rate drops sharply due to better health services, nutrition, and living standards.
This results in a population explosion, where population growth outpaces production and hampers economic progress. Early exit from this stage is crucial for sustained growth.
Economic development leads to universal literacy, increased female workforce participation, and widespread use of family planning.
Birth rate declines significantly, and death rate falls to very low levels due to a youthful population. Eventually, death rates may slightly rise as the population ages.
Population growth slows down or stagnates. Economic growth is seen as a sufficient condition for fertility decline.
India is the second most populated country in the world with a population of 121.02 crore in 2011, accounting for about 17.5% of the global population, despite having only 2.4% of the world's land area.
By contrast:
This imbalance underscores India’s demographic pressure on limited resources.
Population Trends (in crore):
Data Source: Census of India
Overall, India's demographic transition is ongoing, with positive signs of slowing population growth in recent decades, but challenges of density and resource stress remain significant.
The pattern of income distribution in UDCs shows wide disparities. A small section of the population receives a disproportionate share of national income, while the majority subsist on minimal income.
Evidence from 44 UDCs shows that only 6% of the population earns 30–56% of the national income, highlighting extreme inequality.
Economists generally agree on a U-shaped relationship between income distribution and economic growth, known as the Kuznets’ Curve.
Inequality in India can be assessed through data on:
Studies indicate that gross income inequality persists in India. According to the UNDP Human Development Report 2009:
More unequal than income distribution. A 2009-end study found:
Data from National Sample Survey Organisation (NSSO) shows persistent inequality. Notably, wealth inequality is greater than income inequality.
Gini Coefficient for wealth has remained around 0.65.
According to NCAER:
Gini Index for India is 32.5, where 0 indicates perfect equality and 100 indicates maximum inequality.
A World Bank study titled Equity in a Globalising World (2010) concluded that India lacks a real middle class.
Definition: Middle class comprises people earning more than $10/day but excludes the top 5%. In India, those earning over $10/day are already in the top 5%.