Economy is divided into 3 sectors – Primary, secondary and tertiary. The sectoral composition of an economy is decided on the basis of share contributed by each sector towards the GDP of the economy. Primary sector comprises of agriculture, secondary sector consists of manufacturing and services come under tertiary sector. Empirically, it has been noticed that in initial stages of development agriculture sector contributes the most towards the GDP. Later, the share of agriculture shrinks and share of secondary and tertiary sector increases. It is in the developed economies where service sector contributes maximum towards the GDP.
It is not necessary for the service sector of the economy to contribute maximum towards the GDP. The contribution of a sector depends upon the rate of employment in particular sector of the economy. Further, it also depends on the resources and policies taken up by government for development. But, after a certain stage of development services definitely contribute maximum. This is due to a certain living standard achieved by the economy during the growth process where services related to the industrial and agricultural products become more important. Gradually, with technological development there are increased job opportunities in the service sector which leads to an increase contribution of service sector.