by C.R.Yadu and Sahil Mehra*

Within the discourse of Development Economics, the most widely accepted theory is that of ‘structural transformation’ (ST), which posits that, over time, non-agricultural, high productivity, and capitalist sectors will gain greater significance in terms of both national income and employment, while the role of agricultural, low productivity, and non capitalist sectors will decline, eventually dissolving the dualist structure of the economy (Lewis, 1954; Kaldor, 1967). This perspective frames development as a linear trajectory, implying that late industrialisers such as India are expected to follow an ideal typical path of transformation akin to that of Britain and other Western industrial powers, reflecting the spectre of Eurocentric universalism.
Despite the rhetoric, much of the economies of the global South have not been able to undergo the expected path of structural transformation, as a significant proportion of their population remains economically engaged in low-productivity informal sectors – both agricultural and non-agricultural. Based on the experience of many economies in the global South, and particularly drawing on India’s development trajectory, we argue in a recent paper that the prospects for achieving a North-style structural transformation remain bleak in the contemporary global South.

Whither Structural Transformation: Between Historicity and Contemporaneity

Much of the literature largely ignores the importance of historically specific context that played an important role in determining the relative progress of such a process. In this regard, it has been argued that colonialism allowed certain conditions that played a significant role in aiding the capital accumulation process in the industrial sectors of the global North, while subordinating the economic and political landscapes of tropical and subtropical countries. These include the emigration of a significant proportion of population to new found lands in the Americas, Australia, and to the colonies; a labour-intensive industrialisation process; ruthless exploitation of natural resources of the colonies; and unrequited transfer of surplus from colonized regions via cheap raw materials, commodities, labour (including the slave trade), usurious rents, high taxes, and officials’ remittances (Bagchi, 1976; Bhambra, 2020). These conditions that facilitated the process of capital accumulation in metropolitan cores have completely changed in the current post-colonial context.
In the present context, within the economies of global South, the labour is facing a conundrum, as non-agricultural formal sectors are not being able to generate adequate employment and the bulk of the workforce straddles between subsistence agriculture and precarious non-farm occupations. These economies are increasingly undergoing ‘pre-mature de-industrialisation’ due to a shift towards more labour saving technology as well as rise of finance capital. The general decline in labour absorption in developing countries is associated with the ascendance of neoliberal orthodoxy in the policy regimes of these countries. With the retreat of the concept of a ‘welfare state’ on a global scale and fall in welfare entitlements, the contemporary age of neoliberalism vigorously promotes the unbridled informalization of labour without many provisions of social security.

The Indian Scenario: what do the story of two villages say?

Generally, in the case of India, while the share of agriculture in value added as a percentage of GDP fell sharply from around 34 percent in 1977–78 to 16 percent in 2017–18, the sector continued to employ approximately 42 percent of the total labour force in 2017–18. In addition to the macro-level analyses, we analyse the study of two villages – Veerasambanur and Vinayagapuram – located in Tamil Nadu, the most highly industrialised state in the country. Through this, we argue that rather than experiencing the expected trajectory of structural transformation, the study villages are undergoing a process of ‘structural retrogression’.
First, the shift of labour out of agriculture has not been associated with improvements in agricultural productivity, thus going against the postulated theory. Second, our findings suggest that most individuals residing in the villages maintain a tenuous connection to agriculture, with one foot in farming and the other in non-agricultural activities. This is largely due to economic and ecological distress which forces them to engage in different activities to supplement their incomes from cultivation. Thus, indicating that the break from agriculture is not complete, which, in turn, means that they are not affiliated with just one sector. Third, even if the shift is complete, that is, households do not derive any income from agriculture, it should be noted that shift out of agriculture is itself mostly due to the agrarian crisis. Further, among those who have migrated to urban areas, a large majority have ended up in precarious, informal sector employment.
The frustration of not securing employment commensurate with their qualifications was also evident among non-farm workers in the study villages. Regardless of educational background, a significant share of migrants is employed in conditions marked by decent work deficits. The specific character of employment transition in these two villages cannot be fully understood without attending to the ways in which this transformation is deeply differentiated along caste and gender lines. Women are largely excluded from migration streams into non-farm employment, while workers from traditionally marginalised castes are disproportionately concentrated in the lowest tiers of the urban informal labour market. This also reflects the socially embedded nature of postcolonial capitalist transformation in India.

Concluding observations

Much of the theoretical literature across various scholarly traditions continues to examine labour and employment transitions in the global South through the framework of structural transformation, understood as a process that unfolds alongside economic growth and rising productivity. However, we argue that the economic transformation witnessed in much of the global North during the period of industrialisation was historically specific and is unlikely to be reproduced in the global South, given the fundamentally altered postcolonial structural conditions confronting these economies. Our study shows that the shift of employment away from agriculture in the study villages is largely a consequence of economic distress, particularly within the agrarian sector, rather than an indication of rising sectoral productivity or an increase in gainful nonfarm employment. As such, it departs from the theoretically expected path of structural transformation.
All of this underscores the need to move beyond the received wisdom of structural transformation, which remains rooted in a colonial legacy. Grappling with the specific nature of development processes in the global South requires serious engagement with the distinct historical, social, and ecological conditions that shape these trajectories.

References

Bagchi, A. K. (1976). De-industrialization in India in the nineteenth century: Some theoretical implications. The Journal of Development Studies, 12(2), 135–164.
Bhambra, G. K. (2020). Colonial global economy: Towards a theoretical reorientation of political economy. Review of International Political Economy, 28(2), 307–322.
Kaldor, N. (1967). Strategic factors in economic development. New York State School of Industrial and Labor Relations.
Lewis, A. W. (1954). Economic development with unlimited supply of labour. The Manchester School, 22(2), 139–191.
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* C. R. Yadu and Sahil Mehra are affiliated with WELL Labs and Sai University, respectively, in India. This blog is an abridged version of the journal article titled “Re-examining the Narrative of Structural Transformation: Insights from India’s Development Experience”, published by the authors in Forum for Social Economics. The full article provides a more detailed discussion of the near impossibility of structural transformation, along with an in-depth analysis of the Indian context at both macro and micro levels.

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