Chapter-2

Sectors of Indian economy

Economic sector can be classify on the basis of:-

[Link] the basis of nature of economic activities-

a. When we produce a good by extraction and collection of natural resources, it is known as

the primary sector. Eg: Farming, forestry, hunting, fishing and mining.
b. The secondary sector covers activities in which natural products are changed into other forms
through ways of manufacturing. It is the next step after primary. Some manufacturing processes
are required here. It is also called the industrial sector. For example, using cotton fibre from the
plant, we spin yarn and weave cloth. Using sugarcane as raw material, we make sugar or gur.
c. Tertiary sector includes 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 support
for the production process. It is also called the service sector. Example: Teachers, doctors,
washermen, barbers, cobblers, lawyers, call centres, software companies, etc.

Comparing the 3 Sectors

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. The sum of production in the three sectors gives Gross
Domestic Product (GDP) of a country. GDP is the value of all final goods and services produced
within a country during a particular year. It shows how big the economy is.

Historical change in sectors

1. Primary sector is most less of secondary and tertiary
2. Secondary sector increased rapidly less of tertiary and primary
3. Tertiary sector increased most rapidly

Rising importance of Tertiary sector

a. Services such as hospitals, educational institutions, post and telegraph services, police
stations, courts, village administrative offices, municipal corporations, defence, transport,
banks, insurance companies, etc. are considered as basic services and are necessary for all
people.
b. The development of agriculture and industry leads to the development of services such as
transport, trade, storage, etc.
c. With the rise in the income of people, they start demanding more services like eating out,
tourism, shopping, private hospitals, private schools, professional training, etc.
d. Over the past decade, certain new services based on information and communication
technology have become important and essential.

The primary sector continues to be the largest employer even now because:-

a. It is because not enough jobs were created in the secondary and tertiary sectors.

b. As a result, more than half of the workers in the country are working in the primary sector,
mainly in agriculture, producing only about one sixth of the GDP. In contrast to this, the
secondary and tertiary sectors produce the rest of the produce whereas they employ less
about half the people.

c. It means that there are more people in agriculture than is necessary. So, even if you move a
few people out, production will not be affected. In other words, workers in the agricultural
sector are underemployed.
Unemployment- When a person is willing to do work but is not getting a desirable job.

(i) Seasonal Unemployment:-

• In case of seasonal unemployment, people are not able to find jobs during some months of
that year mainly in agriculture.

• This underemployment can also happen in other sectors. For example there are thousands
of casual workers in the service sector in urban areas who search for daily employment.
Many of them don’t find work every day.

(ii) Disguised Unemployment

• More people engaged in agriculture than are required.

• This kind of unemployment is hidden in contrast to someone who does not have a job and is
clearly visible as unemployed, it is also called disguised unemployment.
How to Create More Employment in rural areas (REFER TO TEXTBOOK FOR DETAILS)

• Improving irrigation

• Investing in transport

• Credit by local banks on low rate of interest.

• Locate industries in semi-rural areas like Opening cold storage

• Only 2/3rd children attend school – open schools – more staf f& Improve health care – more
doctors, nurses

• Improve tourism & cope for extra 35 lakh jobs

• Right to Work led to National Rural Employment Guarantee Act 2005 (MGNREGA) -
guaranteed 100 days of employment per year

2. On the basis of formal structure or employment condition-

Organized Sector Unorganized Sector

(i) Organised sector are (i) Unorganised sector are

registered by the government largely outside the control of
and must follow its rules and government.
regulations.

(ii) Workers in the organised (ii) Workers in the

sector enjoy security of unorganised sector doesn’t
employment. enjoy security of employment.
 (iii) They are expected to work (iii) There is no payment for
only a fixed number of hours. overtime working.

(iv) In this sector, workers get (iv) No such benefits are

paid leave, payment during given.
holidays, provident fund,
gratuity, medical facilities etc.

v Workers recieve a fixed salary v. salary is not fixed

How to protect people working in Unorganized sector:-

• The farmers need to be supported through adequate facilities for timely delivery of seeds,
agricultural inputs, credits, storage facilities etc.
• The government also needs to support small scale industries for procuring raw materials and
marketing output.
• The casual workers in both rural and urban areas need to be protected through the strict
implementation of laws.
3. On the basis of ownership-

Public Sector Private Sector

In the public sector, the government owns In the private sector, ownership of assets and
most of the assets and provides all the delivery of services is in the hands of private
services. individuals or companies.

Railways or post office is an example of the Companies like Tata Iron and Steel Company
public sector. Limited (TISCO) or Reliance Industries Limited (RIL)
are privately owned companies.

The purpose of the public sector is not just to Activities in the private sector are guided by the
earn profits. Its main aim is public welfare. motive to earn profits.

Responsibilities of Government

• Government raises money through taxes and other ways to meet expenses on the services
rendered by it.
• Governments have to undertake heavy spending such as the construction of roads, bridges,
railways, harbours, generating electricity, providing irrigation through dams, etc. Also, it has
to ensure that these facilities are available for everyone.
• There are some activities, which the government has to support to encourage the private
sector to continue their production or business.
• The government in India buys wheat and rice from farmers at a ‘fair price’ and sells at a
lower price to consumers through ration shops. In this way, it supports both farmers and
consumers.
• Running proper schools and providing quality education, health and education facilities for
all are some of the duties of the government.