So far, we know how the size of GDP has increased over the years, as more and more goods and services are produced. It is essential to know how this increase took place and what kind of activities contributed more to this growth of GDP. It has been noted that many of the now developed countries had agriculture and other allied activities as the most important contributor of GDP during the initial stages of development.

As the methods of farming changed and agriculture sector began to prosper, it produced much more food than before. Many people could now take up other activities, as essential food requirements were met by other producers. There were increasing number of craft-persons and traders. Buying and selling activities increased many times, further increasing the demand for goods and services. Besides, rulers employed large number of people as administrators, army etc. However, at this stage, in an overall context, most of the goods produced were from agriculture and related sector and most people were also employed in this sector.

Recall what you have read about the industrial revolution in the earlier classes. As new methods of manufacturing were introduced, factories came up and started expanding. Those people who had earlier worked on farms now began to work in factories in large numbers. People began to use many more goods. There was mass production by factories at much lower rates and these goods reached the markets all over the world. For these countries, industrial production gradually became the most important sector, both in the total production of goods and services and also in the employment of people. Hence, over time, a shift took place. This means that the importance of the sectors had changed. The industrial sector became the dominant sector and the importance of the agriculture sector both for employment and production declined.

In the past 50 years, there has been a further shift from industry to service sector for developed countries. The service sector has become the most important sector in terms of total production. Most of the working people have also made a shift and are now employed in the service sector and most of the production activities are those of services and not manufactured goods. This is the general pattern observed in developed countries. Is a similar pattern observed in India too?