Structural transformation induced by industrialisation is considered as a key factor for developing economies to accelerate growth and catch up with developed economies. However, contrary to the experience of advanced economies, developing economies are undergoing a fall in the share of employment in manufacturing sector at lower levels of per capita income, which is termed as ‘premature-deindustrialisation’. Given this, the prospects of displaced workers from agriculture and industry ending up in actvities with even lower-productivity in services, especially in the informal sector, cannot be ruled out. Thus ‘premature-deindustrialisation’ and dominance of service sector activities are identified as the two significant characteristics of structural change in developing economies. Given this background, our study attempts to shed some light on the impact of structural transformation on economic growth in developing economies. For this purpose, we have applied the Shapley decomposition method on labour productivity to generate a measure of structural transformation. The initial findings results of our analysis indicate that though the unusual structural transformation experience of middle-income countries have enabled them to attain faster growth, the growth cannot be sustained for a longer period. Further, we explore the role of globalisation, especially capital flows, in shaping the trajectory of structural transformation in developing economies. Finally, we would examine the welfare impact of structural transformation in developing economies. In particular we examine how income inequality is altered when major share of employment is generated in low productive service activities.