The flag of the Republic of India contains a blue wheel representing “the wheel of life in [motion] and death in stagnation” (“India,” 2014, n.p.). Post-1980 transitions in the composition of India’s economy reflect motion but not necessarily an equitable future for the nation’s development (Mukherjee, 2010a). I ask the research question, “How do deviations from the Lewis two-sector model describe the development of India’s economic sectors?” India’s deviations from the assumptions of the Lewis two-sector model and, therefore, its consequences help to explain India’s transitions in GDP share by sector and maintenance of primary sector employment dominance. I use development indicator comparisons with developed and other developing nations to reflect the importance of understanding the dynamics of India’s three economic sectors. I use comparisons between the Lewis two-sector model’s assumptions and the results of these assumptions and India’s economic situation to support how India’s economic transitions may be explained by its deviations from this model. In order to put these comparisons in context, I begin with the socioeconomic history of the Republic of India.
Recent History and Economic Policy
India’s post-colonial history influenced its economic transitions. The Republic of India is a former British colony (“India,” 2014). Mohandas Gandhi and Jawaharlal Nehru led non-violent opposition to the British Empire, contributing to the independence of Hindu-majority India and Muslim-majority Pakistan in 1947 (“India,” 2014). The borders defined for independent India contributed to land and sea boundary disputes with neighboring Pakistan and China, especially over the Kashmir region, and the later-formed Bangladesh, which continue today (“India,” 2014). Disputed territories are denoted by the dashed lines in the political map of India given in Figure 1 (United States Central Intelligence Agency, 2014).
The combination of former colonial rule, military conflict with neighboring nations, and a large rural population at the beginning of India’s independent history may have set the stage for subsequent isolationist economic policy (Kaushik, 1997). Between 1951 and 1970, India pursued closed, two-sector (private agriculture and public industry) development (“India,” 2014; Kaushik, 1997). Growth in the service sector exceeded that of the industrial and agricultural sectors during this period, leading India’s service sector to surpass the agricultural sector’s share of GDP in the early 1980s (Mukherjee, 2010a). India’s industrial sector share surpassed the agricultural sector’s share of GDP in the early 2010s (The World Bank, 2014). I will discuss the nature of these transitions in my application of the Lewis two-sector model. Although economic reforms since the 1970s have led to the opening of India’s economy, uncertainty in government policy and corruption continue to affect India’s economic structure (Kaushik, 1997).