SECTORS OF INDIAN ECONOMY

Classification of Economic Activities:-

In order to understand the functioning of any economy, it is important to study
various sectors of the economy.
These sectors can be classified on the following basis:
1. Nature of activity performed:- Primary, Secondary and Tertiary sector
2. Working condition of workers:- Organized and Unorganized sector
3. On the ownership basis:- Public and Private sector.

1. Primary sector:- In this sector, we include those activities in which goods are
produced by exploiting natural resources. It is called Primary sector because it
forms the based for all other products that are made subsequently. Since most
of the products that we get are from agriculture, dairy, fishing and forestry etc,
this sector is also called agriculture and related sector.
2. Secondary sector:- It covers activities in which natural products are changed
into other forms through ways of manufacturing. Products here are not
produced by nature but have to be made and therefore some process of
manufacturing is essential. Since this sector is associated with different kinds of
industries, it is also called industrial sector.
3. Tertiary sector:- These are the activities that help in the development of the
primary and secondary sectors. These activities by themselves do not produce
a good but they provide support for the production process. Transport,
communication, storage, banking, trade are some examples of tertiary activities.
Since these activities generate services rather than goods, this sector is also
called service sector.

Interdependence of three sectors:-

Economic activities, though grouped into three different sectors are highly
interdependent.
1.​Exploitation of the natural resources for the production of consumer goods is
possible only through different activities like extraction (primary), production
(secondary) and retail (tertiary).
2.​It is through primary activities that secondary and tertiary sector came into
being.
3.​Secondary sector requires raw material from the primary sector and services like
finance, transportation and information from the tertiary sector.
4.​Secondary sector produces goods like machines and generators that are used by
primary as well as tertiary sectors.
5.​Tertiary sector provides support activities to primary and secondary sector in
the form of expertise, advertisement, etc.

Gross Domestic Product (GDP):-

GDP refers to the market value of all final goods and services produced in all the
three sectors during a particular year with in a country. So instead of adding the
actual number of goods and services, their market value should be used.
GDP indicates the size of the economy of a country.
The task of measuring GDP is undertaken by the central government ministry, with
the help of various government departments of Indian states and union territories.
Central Statistical Office (CSO) collects information related to total volume of goods
and services with their prices to estimate GDP.

Historical Changes in the sectors:-

Initial stage:-
In the initial stage of development, primary sector was the most important sector of
economic activity. At this stage, most of the goods produced were natural products
from the primary sector; hence most people were employed in this sector.
Second stage:-
Over a long time (more than 100 years), because new methods of manufacturing
were introduced, factories came up and started expanding. Secondary sector
gradually became the most important in total production and employment.
Third stage:-

In past 100 years, there has been further shift from secondary to tertiary sector in
the developed countries. The service sector has become the most important in
terms of total production. Most of the working people are also employed in this
sector.

The rising importance of Tertiary sector:-

Over the past 50 years from 1970 to 2020, while production in all 3 sectors has
increased, it has increased the most in the tertiary sector. The following factors are
making the tertiary sector important in India.
1. Basic services:-
In any developing economy, the government has to provide basic services, like
hospitals, schools, courts, banks, police stations, etc, which fall under the
treasury sector. The development of these is essential.
2. Development of Primary and Secondary sector:-
As the primary and secondary sector develop. The need for support services like
transportation, storage, communication, trade, etc., also increases. This fuels the
growth of the tertiary sector.
3. Rising Income Levels:-
With an increase in income levels, people demand more services like eating out,
shopping malls, tourism, private schools, private hospitals and entertainment, all
of which are part of the tertiary sector.
4. Rise in the 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. The production of these services has been rising rapidly.
5. Globalization:-
Due to globalization, people have become aware of new services, activities and
communication. Because of which tertiary sector has gained importance.

Employment of people in different sectors:-

Change in production is not compatible with change in employment. Primary sector
is still the largest employer in the country.
Although the share of primary sector in GDP is just 20%, but still, it employees
more than 50% of the population.
The main factor responsible for this is that the secondary and tertiary sector has
not created enough jobs.
Even though industrial output went up more than nine times during this 40 years
period the employment in industrial sector went up only by 3 times.
Simultaneously, in the service sector, output rose by more than 14 times,
employment in services went up by 5 times only. Many of the workers in primary
sector are under employed or disguised unemployed. This means more number of
people are working in agriculture than actually required.
Disguised unemployment:- Disguised unemployment is a kind of unemployment
in which some people look like being employed , but actually they are not employed
fully. This situation is also known as hidden unemployment. It refers to a situation
when more people are engaged in a work than required. When the extra workers
are removed, the production remains unaffected. This type of unemployment is also
called under employment, where people are working less than their potential.

Various ways to provide more employment opportunities in rural

areas:-
1. Loans should be provided to small farmers by the government or banks, to have
more irrigation facilities like wells and tube wells in order to enable them to
grow second crop.
2. New dams and canals should be constructed. This will lead to more employment
in the agriculture sector.
3. Transportation and storage facilities must be improved to provide productive
employment to not only the farmers but also to others in services, like transport
and trade.
4. Industries such as daal mill, cold storage, honey collection centres, etc., should be
set up in rural or semi rural areas.
5. More schools should be opened in rural areas. This will provide jobs to about
twenty lakhs people in education sector.
6. Health services should be improved by opening dispensaries and hospitals. This
will create jobs for doctors, nurses and other staff.
7. Tourism, regional craft industry and information technology should be
encouraged by the government to create more employment opportunities.

MNREGA:- The Central Government of India made a law implementing the right to
work. It is called Mahatma Gandhi National Rural Employment Guarantee Act 2005
(MNREGA). Under this act, all those, who are able to and are in need of work, are
guaranteed 100 days of wage employment in a year by the government. If the
government fails in its duty to provide employment, it will give unemployment
allowance to the people. It was started in the villages of 200 districts and has now
been extended to villages in over the 600 districts. 1/3 of the total work is reserved
for women. Thus it provides employment to rural people in the activities specified
under the scheme.

Classification of sectors as organized and unorganized sector:

Organized sector:-
1. It covers those enterprises or places outwork where the terms of employment
are regular and people have assured work.
2. These enterprises are registered with the government and follow its rules and
regulations such as Factories Act, Minimum Wage Act, Payment of Gratuity Act,
etc.
3. Workers have job security.
4. They usually work for a fixed number of hours and receive regular wages.
5. They enjoy benefits like paid leaves, provident fund, gratuity, medical benefits
and pensions upon retirement.

Unorganized sector:-
1. The Unorganized sector is characterized by small and scattered units, which are
largely outside the control of the government.
2. There are rules and regulations, but they are not followed.
3. Workers get lower wages and there is no provision for overtime payments.

4. There is no job security.

5. They do not get such benefits as paid leaves, pensions or medical benefits.

How to protect workers in the Unorganized sector:-

As the workers in the unorganized sectors are low-paid, not regular and are
exploited in different ways, there is need for their protection. Following steps
should be taken to protect them.
1. Generally, the vulnerable people in the unorganized sector are landless,
agricultural laborers, small and marginal farmers, etc., who should be given
support by the government.
2. In urban areas, government should help small scale industry in procuring raw
material and marketing of goods.
3. The interests of casual workers in rural as well as urban areas , must be
protected by laws.
4. Government should take steps to ensure equal treatment for all. So that no one is
socially discriminated.
5. Minimum Wage Act should be passed and enforced strictly.
6. The government should take steps to ensure regulation of working hours and
grant of medical facilities.

Classification of sectors as Public and Private sector:-

Public Sector:-
1. In the public sector the government owns most of the assets and provides all the
services.
2. The purpose of public sector is not just to earn profit, but to maximize public
welfare.
3. The decisions regarding production and distribution are taken by the
government.
4. This sector provides basic services, like education, health, food, and security to
the people.
5. Examples are Indian Railways and the Post Office.

Private Sector:-
1. In the private sector ownership of assets and delivery of services is in the hands
of private individuals or companies.
2. Activities in the private sector are guided by the motive to earn profit.
3. The decisions regarding production and distribution are taken by the owners or
management of the company.
4. This sector provides consumer goods to the people.
5. Examples are TISCO and Reliance Industries limited.

There are several things needed by the society as a whole, but which private
sector will not provide at a reasonable cost. Justify the statement.

Yes, it is true that there are several services which cannot be provided by the
private sector, can be provided by the public sector because:
1. Some of these services need huge investment, which is beyond the capacity of
private sector.
2. Collecting money from thousands of people who use these facilities. is a difficult
task.
3. Even if they do provide these things, they would charge high rates for their use.
4. Examples are construction of roads, bridges, railways, electricity, irrigation
through dams etc.
5. Thus, government has to undertake such heavy spending and ensure that these
facilities are available for everyone.
6. There are some activities that need support of the government in the form of
subsidy, such as provisions of food grains for the poor through ration shops and
supplying electricity to the industries at subsidized rates.

Role of Public Sector in Economic Development:-

Public sector contributes to economic development of a nation in the following
ways:
1. It promotes rapid economic development through creation and expansion of
infrastructure.
2. It creates employment opportunities.
3. It generates financial resources for development.
4. It ensures equality of income, wealth, and thus a balanced regional development.
5. It ensures development of small, medium and cottage industries.
6. It contributes to community development i.e. to the HDI via health and education
services.