Sectors of Indian Economy

Primary Sector
(i) When the economic activity depends mainly on exploitation of natural resources then that
activity comes under the primary sector.
(ii) There are many activities that are undertaken by directly using natural resources.
(iii) Since most of the natural products we get are from agriculture, dairy, fishing, forestry, this
sector is also called agriculture and related sector.

Secondary Sector

(i) The secondary sector covers activities in which natural products are changed into other
forms through ways of manufacturing that we associate with industrial activity.
(ii) Since this sector gradually became associated with the different kinds of industries that came
up, it is also called as industrial sector

Tertiary Sector
(i) These are activities that help in the development of the primary and secondary sectors.
These activities, by themselves, do not produce a good but they are an aid or a support for
the production process.

Interdependency of Sectors:

How do we count the various goods and services and know the total production in each sector?
Which organization is carried out GDP calculation work ?

(i) The value of final goods and services produced in each sector during a particular year
provides the total production of the sector for that year.
(ii) The sum of production in the three sectors gives what is called the Gross Domestic Product
(GDP) of a country.
(iii) It is the value of all final goods and services produced within a country during a particular
year.
(iv) In India, the mammoth task of measuring GDP is undertaken by a central government
ministry. This Ministry, with the help of various government departments of all the Indian
states and union territories, collects information relating to total volume of goods and services
and their prices and then estimates the GDP.

Why the final goods & services, why not the intermediate goods & services ?
(i) The reason is the value of intermediate products are already included in the value of final
product.
(ii) If we calculate the value of intermediate product then there is double counting in the
estimation of GDP.
Intermediate goods:
(i) All those goods, which are used by the producer for producing other goods, are known as the
intermediate goods.
(ii) These goods are not demanded for their own sake but for their use in production of other
goods. Raw- materials and semi-finished goods are regarded as intermediate goods
Final Goods:
(i) Final goods refer to the finished goods, which are sold in the market for consumption and
investment purpose.
(ii) These goods are produced for their own sake, because these are finished product and do not
undergo further processing.
(iii) Final goods satisfy the wants of ultimate producers or consumers or both. Value of these
goods constitutes Gross Domestic Product.
Evolution of an Economy from Primary Sector Based to Tertiary Sector:
(i) During early civilization all economic activity was in primary sector. When the food
production became surplus people’s need for other products increased. This led to
the development of secondary sector.
(ii) The growth of secondary sector spread its influence during industrial revolution in
nineteenth century.
(iii) After growth of economic activities, a support system was needed to facilitate the
industrial activities. Certain activities like transport and finance play an important role
in supporting the industrial activities.
(iv) The service sector has become the most important in terms of total production. Most
of the working people are also employed in the service sector. This is the general
pattern observed in developed countries.

What is the total production and employment in the three sectors in India?

Over the thirty years between 1973 and 2003, while production in all the three sectors has
increased, it has increased the most in the tertiary sector. As a result, in the year 2003, the
tertiary sector has emerged as the largest producing sector in India replacing the primary
sector.

Why is the tertiary sector becoming so important in India? There could be several reasons.

(i) The necessity for basic services like hospital, educational institutions, post and
telegraph services, police stations, courts, administrative services, defense, transport
and banking services have increased with the increase in population.
(ii) The development in the Agricultural and Industrial sectors has increased the need for
services such as transportation, storage and trade.
(iii) As the income of the people increased the demand for services in tourism, retailing,
catering and elite education also increased,
(iv) With higher income people have started travelling long distances for work and
education, resulting in the need for increased services in the transport and
communication sectors.
(v) Due to continuous increase in demand for information and communication
technology.
The second graph shows that share of agriculture decreased substantially and that of industry
remained static and share of services grew. Particularly the growth of share of services sector
was phenomenal from 35% to 55%.

1973 : 75% of working force were employed in agricultural sector

10% of working force were employed in industrial sector
15 % of working force were employed in Tertiary sector

2003: 60% working people were employed in agricultural sector

18% working people were employed in industrial sector
22% working people were employed in Tertiary sector

(i) The primary sector continues to be the largest employer even in the year 2003.
(ii) On the other hand, the growth in employment provided by other two sectors was
substantially low.

It is very much cleared that in agricultural sector maximum people were employed but its
contribution towards the GDP of the country was low in comparison to other sector.

More people employed : Less Total Production (Agriculture)

Less people employed : More Total Production. (Industries and Tertiary Sector)

Q. Why more people were employed in Agricultural Sector producing very less amount
of Production.

(i) Enough Jobs were not created in the secondary & tertiary sector.
 Industrial Sector : Production of goods went up y 8 times but employment went up by
2.5 times
Tertiary Sector : Production went up by 11 times but employment rose by more than 3
times
As a result
More than half of the workers in the country are working in the primary sector i.e. in
agriculture, producing only a quarter of GDP.
Causes
(i) Workers in agricultural sector are underemployed. That means underemployment is a
situation where each worker is doing some work but no one is fully employed. So this is
the situation where people are apparently working but all of them are made to work less
than their potential. This is also called as Hidden Unemployment or Disguised
unemployment.
(ii) The farmers are using very traditional method for cultivations.
(iii) Farmers are unskilled and uneducated.

This underemployment situation can also visualize in other sectors.

Example
Casual workers in service sector in urban area like painters, plubmbers, repair persons etc.
They are spending the entire day but earn a very little amount.

They are adopting this, because they do not have better opportunities.

How to create more employments

(i) Loans should be provided to small farmers by the government or bank to have more
irrigation facilities like wells and tube-wells in order to enable them to grow second
crop.
(ii) New dams and canals should be constructed. This will lead to more employment in
the agricultural sector.
(iii) Transportation and storage facilities must be improved to provide productive
employment to not only the farmers but also others in services like transport and
trade.
(iv) Banks should provide agricultural credit to the farmers for farming to improve.
(v Industries such as dal mill, cold storage, honey collection centres, processing of
vegetables should be set up in rural or semi-rural areas. Such industries will get raw
materials from the rural areas and will create more employment opportunities for the
rural people.
(vi) School should be opened in rural areas. This will provide jobs to about 20 lakh people
in the educational sector.
(vi) Health services should be improved by opening dispensaries and hospitals. This will
create jobs for doctors, nurses and other staff.
(vii) Tourism, regional craft industry or Information Technology should be encouraged by
the government to create more employment opportunities.
(viii) To provide employment to the people in short run , the Central Govt. of India has
implemented the National Rural Employment Guarantee Act 2005 (NREGA 2005)
otherwise called as right to work in 200 districts of India in 2006 and covered all the
districts of India from 1 April 2008 .it was later renamed as the "Mahatma Gandhi
National Rural Employment Guarantee Act" (or, MGNREGA
National Rural Employment Guarantee Act 2005 (NREGA 2005)
(i) Under NREGA 2005, all those people of rural area, who are able to and are in need
of work have been guaranteed 100 days of employment in a year by the government.
(ii) However, only one person per family is entitled to this benefit. If the government fails
to provide employment, it will give unemployment allowances to the people.
(iii) Another aim of MGNREGA is to create durable assets (such as roads, canals, ponds,
wells). Employment is to be provided within 5 km of an applicant's residence, and
minimum wages are to be paid.
.
DIVISION OF SECTORS AS ORGANISED AND UNORGANISED

(i) Organised sector covers those enterprises or places of work where the terms of
employment are regular and therefore, people have assured work.
(ii) They are registered by the government and have to follow its rules and regulations
which are given in various laws such as the Factories Act, Minimum Wages Act,
Payment of Gratuity Act.
(iii) Workers in the org
(iv) Under Organised sector employments are secured.
(v) They are expected to work only a fixed number of hours. If they work more, they have
to be paid overtime by the employer.
(vi) They also get several other benefits from the employers. They get paid leave,
payment during holidays, provident fund, gratuity etc.
(vii) They are supposed to get medical benefits and, under the laws, the factory manager
has to ensure facilities like drinking water and a safe working environment.
(viii) When they retire, these workers get pensions as well.

Characterstics of unorganized sector

(i) The unorganized sector is characterised by small and scattered units which are
largely outside the control of the government.
(ii) There are rules and regulations but these are not followed.
(iii) Jobs here are low-paid and often not regular.
(iv) There is no provision for overtime, paid leave, holidays, leave due to sickness etc.
(v) Employment is not secured.
(vi) People can be asked to leave without any reason. When there is less work, such as
during some seasons, some people may be asked to leave.

How to protect workers in unorganized sector?

As the workers in the unorganized sector are low-paid, not regular and are exploited in different
ways, there is a need for their protection. The following steps should be taken to provide
protection and support to them:

(i) Generally, the vulnerable people in the unorganized sector are landless agricultural
labourers, small and marginal farmers, carpenters etc. who should be given support by
the government. For example, small farmers who comprise 80% of the rural households,
should be supported in procuring seeds, agricultural inputs, credit, storage facilities and
marketing outlets.
(ii) In urban areas, government should help small scale industry in procuring raw material
and marketing of goods.
(iii) The interests of the casual workers in rural as well as urban areas must be protected by
law.
(iv) As majority of the workers are generally from low castes, they are also socially
discriminated. The government should take steps to ensure equal treatment for all.
(v) Minimum Wages Act should be passed and enforced strictly.
(vi) The government should take steps to ensure regulation of working hours and grant of
medical facilities etc.
(vii) The government should take strict action against those employers who discriminate on
account of caste, creed and gender.

Differentiate between public sector and private sector.

Public Sector
(1) In the Public Sector the govt. own most of the assets and provides all the services.
(2) The motive in the welfare of the people through provision of basic services.
(3) Provides those services which they feel are necessary for people of the region. Ex.
Railway, post office.
(4) Infrastructural development is basically carried out by Public Sector.

Private Sector
(1) In the private sector, ownership of asset’s delivery of services is in the hands of private
individuals or companies
(2) The main motive in private sector is profit motive. They only invest in those areas when
profit margin is maximum.
(3) Only provides those goods & services which yield quick return.
Ex. Reliance India. Limited. Tata Iron & Steel company.
(4) Infrastructural development is some times carried out by private sector but to earn profit.
Ex – Private school, private hospital etc.

IMPORTANT QUESTIONS
Role of Government in Public Sector
Or
Why do modern day governments spend on a whole range of activities?
(i) Welfare of the people: The modern state is a welfare state that looks after the interests of
its citizens. The government is elected by the people. It is responsible to the people in a
democracy. People pay different types of taxes and expect their representatives or the
government to follow policies for the welfare of the people. So, generally those activities which
do not generate profit and are not taken up by the private sector, are taken up by the
government or public sector. The government collects taxes and can raise money to implement
various projects or to provide useful services to the people. Thus. Services like Railway or
Posts and Telegraphs are run by the government for the welfare of the people. Such activities
are also beyond the capacity of the private sector without support.
(ii) Large expenditure: Some activities like construction of roads etc. need large sum of
expenditure that cannot be borne by the private sector. So, the government takes up such
activities in the interest of the people in a democracy.
(iii) Some activities that need support of the government: There are some activities that
need support of the government in the form of subsidy such as provision of food grains for the
poor through ration shops. The government buys wheat, paddy etc. at a higher price but sells at
a lower price at ‘ration shops’. Such activities cannot be taken without support from the
government. Similarly, the government bears the cost of providing cheap electricity to small
scale industries as. Otherwise they may not be able to afford it & may shut down.
(iv) Duty of the government: it is duty of the government to raise the standard of living of the
people. It should make arrangements for quality education and health services in order to take
care of the poorest and most ignored regions of the country through increase in expenditure in
such areas. Thus, the government takes up various activities and spends a lot of expenditure
on them.
Q2. Explain how public sector contributes to the economic development of a nation.
Ans - Answer:-
It contributes in the following ways
1. It promotes rapid economic development through creation and expansion of infrastructure.
2. It creates employment opportunities.
3. It is ensuring equality of income, wealth and thus, a balanced regional development.
4. It encourages development of small, medium and cottage industries .
5. It ensures easy availability of goods at moderate rates.
6. It contributes to community development i.e., to the Human Development Index (HDI) via
health and educational services.

Q.3. Give 3 examples of public sector activities and explain why the government has
taken them up.
Ans -
Three examples are—
(a) Railways : The government has taken this up for the following reasons
(i) Only the government can invest large sums of money on a public project with long gestation
period.
(ii) To ensure and provide transportation at cheap rates.
(b) Electric Power Generation by NTPC : The government has taken this up to provide
electricity at a reasonable rate to consumers.
(c) AIIMS : To provide quality health services at a reasonable rate was the main purpose of the
government to start this, besides medical education.

Q. 4. How are the activities in the economy classified on the basis of employment
conditions?
Ans - Answer:-
They are classified into two types
(i) Organized
(ii) Unorganized
The organized sector covers those enterprises or places of work where the terms of
employment are regular and therefore, people have assured work. They are registered by the
government and have to follow its rules and regulations which are given in various laws such as
the Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops Act etc. Examples are
reliance Industries Ltd, Tata Motors etc.
The unorganized sector contains enterprises not registered by the government. The
unorganized sector is characterized by small and scattered units which do not follow proper
rules for employment or give any leaves or other benefits. Examples are casual workers in
construction, in shops, garages, etc.

Q.5.The workers in the unorganized sector need protection on the following issues-
wages, safety and health. Explain with examples.
Answer:-
The unorganized sector is characterized by small and scattered units which are largely outside
the control of the government. There is no provision for overtime, paid leave, holidays, leave
due to sickness. Here employment is subject to high degree of insecurity. A large number of
people doing small jobs such as selling on the street or doing repair work comes under the
unorganized sector.
Due the these conditions of work, they need, protection on the following issues —
(a) Wages They are low and not regular. There is no provision for overtime, paid leave, etc.
(b) Safety Construction workers can get injured while working and they need to work under safe
conditions
(c) Health Long working hours and unhygienic working environment affect the health of the
workers adversely.

Q.6:- What do you understand by disguised unemployment? Explain with an example

each from the urban and rural areas

Disguised unemployment is a kind of unemployment in which some people look like being
employed but are actually not employed fully. This situation is also known as Hidden
Unemployment. In such a situation more people are engaged in a work than required.
For example in rural areas, this type of unemployment is generally found in agricultural sector,
e.g., in a family of nine people who are all working in the same agricultural plot, even if four of
them are withdrawn, there is no reduction in the output from the plot. So, these four people are
actually disguisedly employed.
In urban areas, this type of unemployment can be seen mostly in service sector. An example is
of a family, whose all members are working in one shop or a small business, but which can
actually be managed by a fewer number of members of the family.

Q.7:- How is tertiary sector different from other sectors? Illustrate with a few examples.

Answer:-
The tertiary sector is different from the other two sectors because the other sectors produce
goods but this sector does not produce goods by itself. Instead, the tertiary sector activities help
in the development of the primary and secondary sectors. These activities are an aid or support
for the production process, e.g., transport, communication, storage, banking, insurance, trade
activities etc. For this reason this sector is also known as service sector.

Q.8. Do you think the classification of economic activities into primary, secondary and
tertiary is useful? Explain how.
Answer:-
The classification of economic activities into primary, secondary and tertiary is useful on
account of the information, it provides on how and where the people of a country are employed.
Also this helps in ascertaining as to which sector of economic activity contributes more or less
to the country’s GDP and per capita income and accordingly the steps are taken by the Govt. .