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Document from the year 2017 in the subject Business economics - General, grade: 9, , language: English, abstract: Currently in India we are observing that the number of labours are shifting from agriculture sector to other sectors of economy. The labour transition occurs due to several reasons one of the main reason is that the fixed wage rate in other sectors as compared to agriculture sector. In this context the Lewis model provides a good framework for explaining the ways in which the fruits of economic development are spread.
Lewis divided developing economy into two sectors: subsistence and capital sector. He assumed that the subsistence sector was characterised by surplus labour and low real wages whereas capital sector characterised by capital intensive production and higher real wages. If we transfer excess labour from agriculture to capital sector it will not affect the production and productivity of subsistence sector and it will increase the production in capital sector which will help in development of economy.
Lewis' model is mainly applicable surplus labour countries. If we take the example of China, Africa, Cambodia and Vietnam which have evidenced the Lewis model we can compare the India with those countries .China, Africa, Cambodia and Vietnam were gone through enormous labour transition which helped in the development of economy of the respective countries. Migration of workforce in India characterised by a shift of predominant share of agriculture to manufacturing activities and service sector.