Sectors of the Indian Economy

Sectors of the Indian Economy

Primary Sector

When we produce a good 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, forestry, this sector is also called agriculture and related sector.

Secondary 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. It is the next step after primary. 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. For example, using cotton fibre from the plant, we spin yarn and weave cloth. Using sugarcane as a raw material, we make sugar or gur. We convert earth into bricks and use bricks to make houses and buildings. Since this sector gradually became associated with the different kinds of industries that came up, it is also called as industrial sector.

Tertiary Sector

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 support for the production process. For example, goods that are produced in the primary or secondary sector would need to be transported by trucks or trains and then sold in wholesale and retail shops. At times, it may be necessary to store these in godowns. We also may need to talk to others over the telephone or send letters (communication) or borrow money from banks (banking) to help production and trade. Transport, storage, communication, banking, trade are some examples of tertiary activities.

3 Sectors are interdependent on each other

Economic activities, though, are grouped into three different categories, are highly interdependent

Multiple Choice

Which of the following is included in tertiary sector?

• ATM booths

• Call centres

• Internet cafe

• All of them

Multiple Choice

When we produce a good by exploiting natural resources, it is an activity of the:

• Secondary sector

• Tertiary sector

• Primary sector

• Organised sector

Multiple Choice

When we produce a good by exploiting natural resources, it is an activity of the:

• Secondary sector

• Tertiary sector

• Primary sector

• Organised sector

GDP / Gross Domestic Product

• The value of final goods and services produced in a country during a particular year is the GDP

Consider Value by numbers

e values of goods and services should be used rather than adding up the actual numbers. For example, if 10,000 kgs of wheat is sold at Rs 8 per kg, the value of wheat will be Rs 80,000. The value of 5000 coconuts at Rs 10 per coconut will be Rs 50,000. Similarly, the value of goods and services in the three sectors are calculated, and then added up.

Final Goods should be calculated

Not every good (or service) that is produced and sold needs to be counted. It makes sense only to include the final goods and services. Take, for instance, 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. 

Historical Changes in sectors

• Generally, it has been noted from the histories of many, now developed, countries that at the initial stages of development, the primary sector was the most important sector of economic activity.

• Over a long time (more than hundred years), and especially because new methods of manufacturing were introduced, factories came up and started expanding. Those people who had earlier worked on farms now began to work in factories in large numbers. People began to use many more goods that were produced in factories at cheap rates. Secondary sector gradually became the most important in total production and employment. Hence, over time, a shift had taken place. This means that the importance of the sectors had changed.

Historical Changes in Sectors

In the past 100 years, there has been a further shift from secondary to tertiary sector in developed countries. 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. 

GDP by Primary, Secondary and Tertiary Sectors

Rising Importance of the Primary Sector

• Over the forty years between 1970-71 and 2010-11, while production in all the three sectors has increased, it has increased the most in the tertiary sector. As a result, in the year 2010-11, the tertiary sector has emerged as the largest producing sector in India replacing the primary sector.

Reasons for rising importance of primary sector

First, in any country several 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 required. These can be considered as basic services. In a developing country the government has to take responsibility for the provision of these services.

Reasons for rising importance of primary sector

Second, the development of agriculture and industry leads to the development of services such as transport, trade, storage and the like, as we have already seen. Greater the development of the primary and secondary sectors, more would be the demand for such services.

Reasons for rising importance of primary sector

Third, as income levels rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, professional training etc. You can see this change quite sharply in cities, especially in big cities

Reasons for rising importance of primary sector

Fourth, over the past decade or so, certain new services such as those based on information and communication technology have become important and essential. The production of these services has been rising rapidly.

Growing importance of Tertiary Sector

However, you must remember that not all of the service sector is growing equally well. Service sector in India employs many different kinds of people. At one end there are a limited number of services that employ highly skilled and educated workers. At the other end, there are a very large number of workers engaged in services such as small shopkeepers, repair persons, transport persons, etc. These people barely manage to earn a living and yet they perform these services because no alternative opportunities for work are available to them. Hence, only a part of this sector is growing in importance.

Share of Sectors in Employment (%) Vs Share in GDP

 

Share of Sectors in Employment (%) Vs Share in GDP

A remarkable fact about India is that while there has been a change in the share of the three sectors in GDP, a similar shift has not taken place in employment. 

 The primary sector continues to be the largest employer even now.

Reason of this Disparity

 It is because not enough jobs were created in the secondary and tertiary sectors. Even though industrial output or the production of goods went up by more than nine times during the period, employment in the industry went up by around three times. The same applies to tertiary sector as well. While production in the service sector rose by more than 14 times, employment in the service sector rose around five times.

Underemployment/ Disguised unemployment

more than half of the workers in the country are working in the primary sector, mainly in agriculture, producing only a quarter of the GDP. In contrast to this, the secondary and tertiary sectors produce three-fourth of the produce whereas they employ less than half the people. Does this mean that the workers in agriculture are not producing as much as they could? 

Underemployment in Agricultural Sector

What it means is 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 agricultural sector ar e under - employed.

Case Study

For instance, take the case of a small farmer, Laxmi , owning about two hectares of unirrigated land dependent only on rain and growing crops like jowar and arhar. All five members of her family work in the plot throughout the year. Why? They have nowhere else to go for work. You will see that everyone is working, none remains idle, but in actual fact their labour effort gets divided. Each one is doing some work but no one is fully employed. This is the situation of underemployment, where people are apparently working but all of them are made to work less than their potential.

Unemployment Vs Disquished Unemployment

Underemployment is hidden in contrast to someone who does not have a job and is clearly visible as unemployed. Hence, it is also called disguised unemployment.

Underemployment in other sectors

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. They are employed as painters, plumbers, repair persons and others doing odd jobs. Many of them don’t find work everyday. Similarly, we see other people of the service sector on the street pushing a cart or selling something where they may spend the whole day but earn very little. They are doing this work because they do not have better opportunities.

Ways to increase employment

The government can spend some money or banks can provide a loan, to construct a well for her family to irrigate the land. Laxmi will then be able to irrigate her land and take a second crop, wheat, during the rabi season.

Ways to increase employment

 Government invests some money in transportation and storage of crops, or makes better rural roads so that mini-trucks reach everywhere several farmers like Laxmi, who now have access to water, can continue to grow and sell these crops. This activity can provide productive employment to not just farmers but also others such as those in services like transport or trade.

Ways to increase employment

The local bank gives her credit at a reasonable rate of interest, she will be able to buy seeds, fertilizers, agricultural types of equipment, and pump sets to draw water.

Ways to increase employment

Another way by which we can tackle this problem is to identify, promote and locate industries and services in semi-rural areas where a large number of people may be employed. For instance, suppose many farmers decide to grow arhar and chickpea (pulse crops). Setting up a dal mill to procure and process these and sell in the cities is one such example. Opening a cold storage could give an opportunity for farmers to store their products like potatoes and onions and sell them when the price is good.

Ways to increase employment

Government invests in developing basic health care and education. This not will generate more jobs but also significantly improve human resource

Right to Work

National Rural Employment Guarantee Act 2005 (NREGA 2005). Under NREGA 2005, 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. 

Multiple Select

when we include intermediate goods in the estimation of GDP we face the problems like:

• Double accounting

• Unemployment

• Poverty

• Overestimation of GDP

Multiple Choice

Which sector has the largest contribution in GDP?

• Agriculture sector

• Industrial sector

• Service sector

• Manufacturing sector

Multiple Choice

What will happen if the government fails to provide 100 days employment under NREGA?

• No extra benefit will be given

• The officer-in-charge will be punished

• Unemployment allowance will be given

• Food grains will be provided

Multiple Choice

GDP is the sum total of the value of ________ produced during a particular year.

• all goods and services

• all final goods and services

• all intermediate goods and services

• all intermediate and final goods and services

Multiple Choice

MGNREGA was implemented in

• 1990

• 1998

• 2000

• 2005

Multiple Choice

which sector has considerably grown in recent years

• primary

• secondary

• teritary

• public sector

Multiple Choice

A situation in which more persons are employed on a job than are optimally required is:

• Structural unemployment

• Seasonal unemployment

• Disguised unemployment

• Cyclic unemployment

Organized Sector

 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 and Establishments Act etc. It is called organised because it has some formal processes and procedures. 

Organized Sector

Workers in the organised sector enjoy security of employment. They are expected to work only a fixed number of hours. If they work more, they have to be paid overtime by the employer. They also get several other benefits from the employers. What are Workers in the organised sector enjoy security of employment. They are expected to work only a fixed number of hours. If they work more, they have to be paid overtime by the employer. They also get several other benefits from the employers. What are

Unorganized Sector

The unorganised sector is characterised by small and scattered units which are largely outside the control of the government. There are rules and regulations but these are not followed. Jobs here are low-paid and often not regular. There is no provision for overtime, paid leave, holidays, leave due to sickness etc. Employment is not secure. 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. A lot also depends on the whims of the employer. This sector includes a large number of people who are employed on their own doing small jobs such as selling on the street or doing repair work. Similarly, farmers work on their own and hire labourers as and when they require.

How to Protect Workers in the Unorganised Sector?

 In the rural areas, the unorganised sector mostly comprises of landless agricultural labourers, small and marginal farmers, sharecroppers and artisans (such as weavers, blacksmiths, carpenters and goldsmiths). Nearly 80 per cent of rural households in India are in small and marginal farmer category. These farmers need to be supported through adequate facility for timely delivery of seeds, agricultural inputs, credit, storage facilities and marketing outlets.

How to Protect Workers in the Unorganised Sector?

In the urban areas, unorganised sector comprises mainly of workers in small-scale industry, casual workers in construction, trade and transport etc., and those who work as street vendors, head load workers, garment makers, rag pickers etc. Small-scale industry also needs government’s support for procuring raw material and marketing of output. The casual workers in both rural and urban areas need to be protected.

Public Sector

In the public sector, the government owns most of the assets and provides all the services.Railways or post office is an example of the public sector

Private Sector

In the private sector, ownership of assets and delivery of services is in the hands of private individuals or companies. Tata Iron and Steel Company Limited (TISCO) or Reliance Industries Limited (RIL) are privately owned.

How does the public Sector contribute in the growth of a country?

There are several things needed by the society as a whole but which the private sector will not provide at a reasonable cost. Why? Some of these need spending large sums of money, which is beyond the capacity of the private sector. Also, collecting money from thousands of people who use these facilities is not easy. Even if they do provide these things they would charge a high rate for their use. Examples are construction of roads, bridges, railways, harbours, generating electricity, providing irrigation through dams etc. Thus, governments have to undertake such heavy spending and ensure that these facilities are available for everyone.

How does the public Sector contribute in the growth of a country?

There are some activities, which the government has to support. The private sector may not continue their production or business unless government encourages it. For example, selling electricity at the cost of generation may push up the costs of production of goods in many industries. Many units, especially small-scale units, might have to shut down. Government here steps in by producing and supplying electricity at rates which these industries can afford. Government has to bear part of the cost

How does the public Sector contribute in the growth of a country?

Similarly, the Government in India buys wheat and rice from farmers at a ‘fair price’. This it stores in its godowns and sells at a lower price to consumers through ration shops.

How does the public Sector contribute in the growth of a country?

There are a large number of activities which are the primary responsibility of the government. The government must spend on these. Running proper schools and providing quality education, particularly elementary education, is the duty of the government. India’s size of illiterate population is one of the largest in the world.

How does the public Sector contribute in the growth of a country?

Government also needs to pay attention to aspects of human development such as availability of safe drinking water, housing facilities for the poor and food and nutrition. It is also the duty of the government to take care of the poorest and most ignored regions of the country through increased spending in such areas.

Multiple Choice

In which sector there is no provision for overtime, paid leave, holidays etc.

• Organised sector

• Public sector

• Unorganised sector

• Primary sector

Multiple Choice

Railway is an example of :

• Private Sector

• Public Sector

• Secondary Sector

• None of these

Multiple Choice

The motive of Private sector enterprises is:

• Profit making

• Entertainment

• Social welfare and security

• None of these

Multiple Choice

Which of the following examples does not fall under unorganized sector?

• A farmer irrigating his field.

• A daily wage labourer working for a contractor

• A doctor in a hospital treating a patient.

• A handloom weaver working on a loom in her house.

Multiple Choice

Choose the correct meaning of organised sector:

• It covers those enterprises where the terms of employment are regular with good working conditions.

• It is outside the control of the government.

• Jobs are not regular but working conditions are good.

• It provides low salary but tenure is fixed.