CHAPTER – 2 SECTOR OF THE INDIAN
ECONOMY
Economic Activities
• Those activities which generates some income are known as
economic activities.
→ For example, a computer engineer creating software for profit
is making money from his work.
• Division of Economic Activities:
→ Primary sectors: related to farming activities.
→ Secondary sectors: related to manufacturing.
→ Tertiary sector: provide support to other two sectors.
Comparison of three sectors of the Economy (Through
productivity and population)
• As thousands of economic activities going around in all three
sectors, it makes almost impossible to take account of every such
activities.
• We check only final goods and services.
• for example, a farmer who sells wheat to a flour mill for Rs 8 per
kg.
→ The mill grinds the wheat and sells the flour to a biscuit
company for Rs 10 per kg.
→ The biscuit company uses the flour and things such as sugar
and oil to make four packets of biscuits.
→ It sells biscuits in the market to the consumers for Rs 60 (Rs 15
per packet).
→ Biscuits are the final goods, i.e., goods that reach the
consumers.
Gross Domestic Product (GDP)
• The value of final goods and services produced in all three
sectors during a particular year provides the total production of
the sector for that year is called the Gross Domestic Product
(GDP) of a country.
• More the GDP, more bigger the economy of the country is.
CHAPTER – 2 SECTOR OF THE INDIAN
ECONOMY
Historical Changes in sectors
• At initial stages of development, primary sector was the most
important sector of economic activity in a country.
• With the innovation in farming methods, agriculture sector
began to produced much more food than before.
• People started working in industries. 5. Some people also get
involved in transportation.
• Gradually, Secondary sector became the most important in
economy and providing employment. 2.
Different industries related to food processing, equipment’s
making, textiles coming in large numbers.
• This lead to start of services such as banking, health, education
etc.
• The service sector has become the most important sector in
terms of total production and started employing more people.
Contribution in GDP
• In the period of 1973-74, the primary sector has contributed
maximum to the GDP
• But in 2013-14 when tertiary sector has contributed maximum
in GDP. Now the question is Why? There are various factors
behind this. Let’s study these in detail.
Factors behind the shift in contribution in GDP
CHAPTER – 2 SECTOR OF THE INDIAN
ECONOMY
• The development of agriculture and industry leads to the
development of services such as transport, trade, storage,
banking.
• The greater the development of the primary and secondary
sectors, more would be the demand for such services.
Where are most of the people employed?
• In the period during 1973-74, 40% is contributed by the primary
sector in GDP of the country
→ Secondary sector contributed only 12% and 48% is contributed
by the tertiary sector.
→ Employment percent during the period of 1972-73, 74% people
of India are engaged in primary sector while only 15% are
involved in tertiary sector.
• In 2013-14, the percent of contribution of tertiary sector in GDP
of the country increased and reached to 67%
→ The primary sector reduced to only 12%.
→ The primary sector continues to be the largest employer during
2011-12.
Disguised Unemployment
• More people engaged in agriculture than the necessity.
• This kind of underemployment 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 employment?
• Granting Loans at lower interest Rate
• Investing in infrastructure such as Building a dam at suitable
place.
CHAPTER – 2 SECTOR OF THE INDIAN
ECONOMY
• Increasing efficiency of transportation and Storage.
• Promoting small scale Industries such as mills, honey collection
centers.
• Emphasis on Education and training center.
• Identifying Potential of an area. For example, an area can be
developed as tourist site.
Government Welfare Schemes like making well or pump near
farms, providing electricity, building hospitals.
MGNREGA
• The central government in India made a law implementing the
Right to Work in 625 districts called Mahatma Gandhi National
Rural Employment Guarantee Act 2005 known as MGNREGA
2005.
• Under MGNREGA 2005:
→ In rural areas, all those who are able to, and are in need of work
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.
Difference between Organised and unorganised sectors
• Organised sector are registered by the government and have to
follow its rules and regulations while unorganised sector are
largely outside the control of the government.
CHAPTER – 2 SECTOR OF THE INDIAN
ECONOMY
• Workers in the organised sector enjoy security of employment
while in the unorganised sector, there is no job security.
• Organised sector are expected to work only a fixed number of
hours while in unorganised sector, there is no pay for overtime
working.
• Organised sector workers get paid leave, payment during
holidays, provident fund, gratuity, medical benefits etc while no
such benefits are given in unorganised sector.
• Examples of organised sectors are government employees,
banks while examples of unorganised sectors are home tutors,
person working in small general stores.
Classification of Economic activities into sectors (on the
basis of who owns assets and is responsible for the
delivery of services)
Activities can be classified into two types:
• Public sector:
→ The government owns most of the assets and provides all the
services.
→ Example: Railways or post office
• Private sectors:
→ Ownership of assets and delivery of services is in the hands of
private individuals or companies.
→ Example: Tata Iron and Steel Company Limited (TISCO) or
Reliance Industries Limited (RIL).