This article revisits the role of manufacturing and services in economic development in the light of a number of new phenomena: a faster growth of services than of manufacturing in many developing countries; the emergence of ‘de‐industrialization’ in several developing countries, at low levels of per capita income; jobless growth in the formal sector, even in fast‐growing countries such as India; and a large expansion of the informal sector in developing countries. Although this article examines these phenomena in the specific context of the Indian economy, the analysis has much wider application and implications, both for economic policy and for theories of growth and structural change.