SECTORS OF THE INDIAN ECONOMY

Sectors of Economic Activities

 People are engaged in various economic activities.
 Some of these are activities producing goods.
 Some others are producing services.
 We can study these economic activities by grouping them (classifying them) using some
important criteria. These groups are also called sectors.
Primary (Agriculture) Sector
These are activities that are undertaken by directly using natural resources.
 Example 1: The cultivation of cotton.
 It takes place within a crop season. For the growth of the cotton plant, we depend
mainly, but not entirely, on natural factors like rainfall, sunshine, and climate. The
product of this activity, cotton, is a natural product.
 Example 2: Dairy
 We are dependent on the biological process of the animals and the availability of
fodder, etc. The product here, milk, also is a natural product.
 Example 3: Mining
 Minerals and ores are also natural products.
When we produce goods by exploiting natural resources, it is an activity of the primary sector.
Since most of the natural products we get are from agriculture, dairy, fishing, and forestry, this
sector is also called agriculture and related sector.
Secondary (Industrial) Sector
 The secondary sector covers activities in which natural products are changed into other
forms through ways of manufacturing that we associate with industrial activity.
 The product is not produced by nature but has to be made and therefore some process of
manufacturing is essential. This could be in a factory, a workshop, or at home.
 Since this sector gradually became associated with the different kinds of industries that
came up, it is also called as industrial sector.
Tertiary (Service) Sector
 Economic activities in this sector 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
support for the production process.
 For example, transport, storage, communication, banking, and trade are some examples of
tertiary activities.
 The service sector also includes some essential services that may not directly help in the
production of goods.
 For example, we require teachers, doctors, and those who provide personal services such as
washermen, barbers, cobblers, lawyers, and people to do administrative and accounting
works.
 In recent times, certain new services based on information technology such as internet
cafes, ATM booths, call centers, software companies, etc have become important.
 Since these activities generate services rather than goods, the tertiary sector is also called
the service sector.
Interdependence of Three Sectors
The tertiary sector does not produce any goods but it helps in the production of goods in the primary
and secondary sectors. For example:
 In the primary sector, we need the service of transportation for getting the supply of
agricultural inputs and also for selling food grains in the market or supplying agricultural raw
materials to agro-based industries.
 In the secondary sector, we need the help of transportation for bringing the raw materials
and taking the final products to the market.
 Transportation is required in the service sector as well such as for providing medical facilities
to the people and other services like fire services, etc.
Tertiary Sector
Milk vendor ,Priest, Courier,Moneylender, Astronaut, Call centre employee, Secondary Sector, Tailor
Basket weaver, Workers in match factory, Potter, Primary Sector, Flower cultivator, Fishermen,Bee-
keeper, Gardener
Final Goods and Intermediate Goods
Final Goods Intermediate Goods

i. The goods which are used for final i. The goods which are used up in producing final goods
consumption. & services.

ii. Value of final goods is included in the ii. The value of intermediate goods is not included in the
GDP. GDP.

iii. For example - TV, Bread, Bakery

iii. For example - Flour, cotton, etc.
products, etc.
Gross Domestic Product (GDP)
Gross Domestic Product (GDP) is a broad measurement of a nation’s overall economic activity. GDP
is the monetary value of all the finished goods and services produced within a country’s borders in a
specific time period.
Historical Change in Sectors
 The histories of many developed countries indicate that the primary sector was the most
dominant sector of their economic activity at the initial stages of development. At that
stage, most of the goods produced were natural products from the primary sector.
 In the later phase, new methods of manufacturing were introduced, factories came up and
people started shifting from agriculture to the secondary sector.
 Later on, there has been a further shift from the secondary sector to the service sector. Most
of the people employed in the primary and secondary sectors now shifted to the service
sector and thus service sector became the most dominant sector.
Primary, Secondary, and Tertiary Sectors in India
Rising Importance of the Tertiary Sector in Production
Over the forty years between 1973-74 and 2013-14, while production in all three sectors has
increased, it has increased the most in the tertiary sector.
As a result, in the year 2013-14, the tertiary sector emerged as the largest producing sector in India
replacing the primary sector.
Reasons for Rising Importance of the Tertiary Sector in India:
 Basic services: Services such as hospitals, educational institutions, post and telegraph
services, transport, banks, and insurance companies are in this group.
 Development of primary and secondary sectors: The development of agriculture and
industry leads to the development of services such as transport, trade, and storage.
 Rise in income levels: As income levels rise, certain sections of people start demanding many
more services like eating out, tourism, shopping, private hospitals, private schools, and
professional training centers.
 Rise in information technology: Over the past decade or so, certain new services, such as
those based on information and communication technology have become important and
essential.
 Globalization: Due to globalization, people have become aware of new services and
activities, because of which the tertiary sector has gained importance.
But the entire tertiary sector has not grown in importance:
The service sector includes two different kinds of people. One who is highly educated, skilled, and
earning very high such as doctors, engineers, software professionals, etc., and on the other hand
those who are not educated and unskilled such as street vendors, repair persons, etc. Though the
service sector has grown over the past few decades not all of the service sector has grown equally.
The educated and highly skilled workers have grown high whereas the uneducated and the unskilled
barely manage to earn a living and yet they perform these services because no alternative
opportunities for work are available to them.
Where are most of the people employed?
The primary sector is the largest employer in India. Nearly 44% of the population is engaged in this
sector in one way or the other. However, its share in the GDP is very less because of the following
reasons:
 The average size of the land holdings is very low which results in low productivity per holder.
 Less use of modern technology and know-how among the farmers to increase crop
productivity.
 The system of providing financing and marketing facilities has been insufficient since
independence. The small and marginal farmers are not able to get benefits from the loan
facilities and access to large markets.
 The absence of alternate income-generating activities in rural areas gives rise to disguised
unemployment where the efficient labor force is not used.
i. Underemployment: A situation where someone works less than their full potential or capacity.
This can happen due to various reasons like:
 Part-time work when desiring full-time.
 A job that doesn't utilize their full skillset.
 Seasonal work with limited hours during off-seasons.
ii. Disguised unemployment: Specific Type of Underemployment. Occurs when there's a surplus of
labor in a particular sector, often agriculture.
In summary, underemployment is more related to the quality of the job, while disguised
unemployment is related to the quantity of the job.
How to create more employment in rural areas?
Employment can be generated in rural areas by:
 People can be employed in projects like the construction of dams/canals/roads in the village.
 Provide irrigation facilities so that farmers harvest two or three crops in a year. Thus, more
people can be employed.
 Government can open centers to give them training and financial assistance to help them
become self-employed.
 Government can invest and employ people in providing transportation and storage services.
 Honey collection centers and vegetable and fruit processing units should be set up.
 More cottage industries and services should be promoted in rural areas with soft loans and
marketing support.
How to create more employment in urban areas?
There are a number of ways to increase urban employment in India, including:
 Encouraging foreign investment: Attracting foreign investment can create jobs in a variety of
industries, including manufacturing, technology, and services.
 Developing small and medium-sized enterprises (SMEs): SMEs are a major source of
employment in urban areas, and policies that support their growth and development can
help to create jobs.
 Providing vocational training: Vocational training can help to match workers with the skills
that are in demand in the urban labor market.
 Promoting the growth of the service sector: The service sector, including tourism, retail, and
healthcare, is a major source of urban employment in India. Policies that encourage the
growth of this sector can help to create jobs.
 Focusing on Infrastructure development: Infrastructure development can create jobs in the
short term, as well as make it easier for businesses to operate and for people to move
around in the long term.
 Encouraging entrepreneurship: Encouraging entrepreneurship can help to create new
businesses and jobs, particularly in the informal sector.
 Improving access to credit: Improving access to credit can help entrepreneurs and small
businesses grow, which can create jobs.
Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA 2005)
 The central government in India made a law implementing the Right to Work in about 625
districts of India. It is called Mahatma Gandhi National Rural Employment Guarantee Act
2005 (MGNREGA 2005).
  Under MGNREGA 2005, all those who are able to, and are in need of work in rural areas are
guaranteed 100 days of employment in a year by the government.
 If the government fails in its duty to provide employment, it will give unemployment
allowances to the people.
 The types of work that would in the future help to increase the production from land will be
given preference under the Act.
Division of Sectors as Organized and Unorganized
Organized Sector Unorganized Sector

i. These units are not registered with the

i. These units are registered with the government.
government.

ii. These are big units. ii. These are small and scattered units.

iii. They follow the labor laws given by the iii. They do not follow the labor laws given by
government. the government.

iv. There are some formal processes and iv. There are no formal processes and
procedures in this sector. procedures in this sector.

v. There is a security of employment. v. There is no security of employment.

vi. There are fixed working hours and workers are vi. There are no fixed working hours and
paid for overtime. workers are not paid for overtime.

vii. There are some other benefits like paid vii. There are no benefits like paid holidays,
holidays, medical facilities, a safe working medical facilities, a safe working environment,
environment, a provident fund, etc. provident fund, etc.
Flexible Labor Laws: It means:
 The company hires workers for a short period.
 A lot of pressure and work overtime with no extra payment.
 No work when there is no demand.
Government can:
 Set some laws to see that the companies see the welfare of the workers.
 See if the labor laws are properly implemented.
 Government can create opportunities for alternative employment.
Sectors in Terms of Ownership: Public and Private Sectors
Public Sector Private Sector

i. The sector of a nation's economy which is i. The sector of a nation's economy which is owned and
under the control of the government is known controlled by private individuals or companies is known
as the public sector. as the private sector.

ii. Government owns most of the assets and ii. Ownership of assets and delivery of services is in the
provides all the services. hands of private individuals or companies.

iii. The main motive is to provide benefits to the

iii. The main motive is to earn profit.
people.

iv. To get services we have to pay money to individuals

iv. Government can raise money through taxes.
or companies.

v. For example - police, army, health, Indian

v. For example - Reliance company limited, TISCO, etc.
railways, etc.
The public sector plays a major role in India than the private sector because:
 The public sector is owned and run by the government. They enable the government to have
control over the economy for the benefit of the people in general.
 It creates employment opportunities.
 It generates financial resources for development.
 It ensures equality of income, and wealth and thus a balanced regional development.
 Activities undertaken by the public sector require a huge amount of money. But it provides
the services at a lower rate.
 Its investment in the infrastructure sector paves the way for the agricultural and industrial
development of a country like India.
 It encourages the development of small, medium, and cottage industries.