Sectors of Indian Economy

1. CHEENA PUBLIC SCHOOL

3. • In our day to day life ,we perform various types of
activities. Some of the activities are performed to
earn income and some of the activities are
performed as a part of our duty and for our own
amusement. Depending on the purpose, we can
divide the activities into two types-
• Economic activities and (ii) Non-economic activities
• Economic activities: The activities which are
performed to earn and income is called economic
activities.
• Non- economic activities: The activities for which we
do not get any income, but we perform the activities
as a part of our duty or for our own amusement. For
example, the services of the house wife, a teacher
teaching his own children, a player playing for his
own amusement etc.

4. • All the economic activities that we perform are classified
into three sectors- (on the basis of nature of economic
activities)
• Primary sector (ii) Secondary Sector and (iii) Tertiary
Sector
• Primary Sector : When we produce a good by exploiting
natural resources, it is an activity of the primary sector. This
sector is also called agriculture and related sector.
Examples of primary sector activities are- cultivation of
crops, mining, , Pisciculture, horticulture etc.
• 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. For example, spinning yarn from cotton
fibre, making sugar from sugarcane etc.

5. • Tertiary sector: The tertiary sector activities help in the
development of primary and secondary sectors. These
activities are an aid or a support for the production
process. For example, transport, storage, communication,
banking etc.

6. • What is the need of classifying the activities into three
sectors?
• Classification of economic activities into primary, secondary
and tertiary sector is useful as there are varieties of
economic activities which are performed by the humans. In
order to understand the nature of these activities and the
role performed by the people in fulfilling these activities,
we need to classify these into the three sectors. Further,
the classification also helps us in ascertaining the
contribution of each sector to the Indian economy. Based
on these, the government may also initiate reforms in a
sector, which according to it has not developed up to its full
potential.
• All the three sectors produce a very large number of goods
and services. The contribution of each sectors towards the
economy of a country is calculated.

7. • Gross Domestic Product(GDP) : It is the value
of all final goods and services produced by the
three sectors during a particular year within
the geographical boundary of a country. When
we add the earnings from abroad with GDP,
we get GNP(Gross National Product).
• The Central Statistical Office (CSO) is
responsible for compiling data for calculating
GDP.
• It uses two methods- (i) GDP at factor cost, it
looks at economic activity.
• (ii) Expenditure – based method.

8. • Historical change in sectors:
• At the initial stages of development, primary
sector was the most important sector of
economic activity. As the agricultural sector
began to prosper, many other activities were
taken up by people. Over a long time, and
especially because new methods of
manufacturing were introduced, factories came
up and started expanding. 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. The importance of
sectors changed from primary to secondary.

9. • In the past 100 years, there has been a
further shift from secondary to tertiary sector.
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. So, now a days, the tertiary
sector is the most important sector in the
economy and it’s contribution is also the
maximum towards National Income.

10. • Why is the importance of Tertiary sector rising so
fast?
• The main reasons for the rising importance of the
tertiary sector are-
• In any country the basic services such as hospitals,
educational institutions, post and telegraph services,
police stations, courts, defence, transport, banks etc
are taken up by the government. All these services
employ a large number of people and all these people
come in the service sector.
• The development of agriculture and industry leads to
the development in the tertiary sector by demanding
many services such as transport, trade, storage and the
like.

11. • As income levels rise, certain sections of
people start demanding many more services
such as eating out, tourism, shopping, private
hospitals, private schools etc. All these
services also come in the tertiary sector.
• Over the past decades, certain new services
have become essential such as those based on
information and communication technology.
All those services also come in tertiary sector.

12. • Where are most of the people employed in
India ?
• Though the contribution of the tertiary
sector is the maximum towards national
income, till today in India the maximum
people are employed in the primary sector.
How can it happen? Maximum people , but
contribution is the least. Definitely there
would be some problems in the primary
sector. What are these problems?

13. • There are two main problems in the primary
sector-
• Disguised unemployment and
• Under employment
• Disguised unemployment : It is a situation in
which people seems to be employed, but if we
remove some of them the total production
remains unchanged. In agricultural sector,
there are many people who are disguised.
• Under employment: In case of under
employment, people work below their
capacity.

14. • How to create more employment opportunities for
the unemployed people?
• People those who are not practically doing any work,
we will have to create some employment opportunities
for them. The following steps can be taken for this
purpose-
In rural areas:-
Ans. (i) Diversification of agriculture: More than 60
per cent of our workers are employed in agriculture.
But ‘our farmers are producing only limited crops.
There is need to diversify agriculture. Farmers should
be encouraged to adopt pisciculture, horticulture,
animal rearing, etc., along with cultivation of crops.

15. • (ii) Cheap credit : Most of the farmers depend on
informal sources of credit, i.e., moneylenders,
relatives, traders, etc., who charge a very high rate of
interest. Government should encourage the
commercial banks to provide loans to the farmers at
cheaper rates.
• Provision of basic facilities : Our rural areas lack the
basic facilities like roads, transportation, banking,
warehouses, markets, etc. The government should
invest some money in these sectors so that the Indian
villages can be linked to other markets. This activity can
provide productive . employment to not just farmers,
but also to others such as those in services like
transport or trade

16. • (iv) Promotion of local industries and other
activities : Another way to tackle this problem
is to identify, promote and locate industries,
especially the cottage and small- scale
industries in semi-rural areas, where a large
number of people may be employed. It also
includes setting up a flour or rice mill to
procure and process these and sell in the
cities. In villages, near forest areas, honey
collection centres can be started where
farmers can come and sell wild hone

17. • In Urban areas:-
• To increase employment in urban areas, we will need to carry out
the following tasks
(i) Invest in basic industries which provide mass employment.
(ii) Improve local and inter-city transportation so that more people
can be employed to work in the transportation industry.
(iii) Increasing vocational education courses, so that people
educated for a vocation get jobs easily.
Give incentives for industry in urban areas to increase their
capacity.
Except these measures, to create more employment opportunities
in rural areas, the government introduced MNREGA in 2005.

18. NATIONAL RURAL EMPLOYMENT GUARANTEE
SCHEME
The National Rural Employment Guarantee Act was notified by
The Government of India on September, 2005 and was made effective
w.e.f. 2nd February 2006. In the first phase, the National Rural Employment
Guarantee scheme (NREGS) was introduced in District Chamba and Sirmour on 2nd
February, 2006.
In second phase NREGS was started in District Kangra and Mandi w.e.f. 1-4-2007.
In the third phase all the remaining 8 districts of the State have been covered under
the scheme w.e.f. 1.4.2008.

19. • 1. SALIENT FEATURE
• The salient feature of the scheme is to provide for the
enhancement of livelihood security of the households
in rural areas of the State by providing 100 days of
guaranteed wage employment in every financial year
to every household whose adult members volunteer
to do unskilled manual work.
• PERMISSIBLE WORKS
• As per schedule 1 of the Act the focus of the scheme is on the
• following works in their order of priority:-
• (i) Water Conservation and Water Harvesting works;
• (ii) Drought proofing works (including afforestation and tree
• plantation)
• (iii) Irrigation canals including micro and minor irrigation
• works;

20. • (iv) Provision of irrigation facility, horticulture plantation
• and land development facilities on land owned by the
households belonging
• to the Scheduled Caste and Scheduled Tribes or to
below poverty
• line families or to Marginal Farmers or Small Farmers to
• beneficiaries of land reforms or to the beneficiaries
under the Indira Awas
• Yojana of the Government of India;
• (v) Renovation of traditional water bodies including de-
silting
• of tanks ;
• (vi) Land developments works;
• (vii) Flood control and protection works including
drainage in
• water logged areas;

21. • (viii) Rural connectivity to provide all-weather
access; and
• (ix) Any other work which may be notified by
the Government of
• India in consultation with the State
Government.
• The Government of India has been requested
to allow engaging
• "Crop protectors" as one of the Permissible
works under NREGA for
• Himachal Pradesh.

22. • Divisions of sectors on the basis of facilities available:
• On the basis of facilities available, sectors are divided
into-
• (i) Organised and (ii) Unorganised sector
• Key Differences Between Organised and Unorganised
Sector
• The difference between organised and unorganised
sector can be drawn clearly on the following grounds:
• Organised Sector is a sector where the employment
terms are fixed and regular, and the employees get
assured work. Unorganised sector is one where the
employment terms are not fixed and regular, as well as
the enterprises, are not registered with the government.

23. • A number of acts apply to an organised sector like Factories
Act, Bonus Act, PF Act, Minimum Wages Act, etc. whereas
unorganised sector is not governed by any such act.
• The government rules are strictly followed in the organised
sector, which is not in the case of unorganised sector.
• In organised sector, the employees draw regular monthly
salaries. On the other hand, in the unorganised sector, the
workers are paid on a daily basis.
• Job security exists in the organised sector, but not in the
unorganised sector.
• The organised sector, provide additional remuneration to
employees for overtime. Conversely, there is no such
provision for overtime in case of the unorganised sector.

24. • In organised sector, the salaries of employees are
as per government norms. In contrast to an
unorganised sector where wages are below, what
is prescribed by the government.
• In organised sectors, workers get a hike on salary,
once in a while. As opposed to an Unorganised
sector where the salaries or workers are rarely
hiked.
• Employees get add-on benefits like medical
facilities, pension, leave travel compensation, etc.
in the organised sector, which is not provided to
the employees working in unorganised sector.

25. • How to protect workers in unorganized
sector?
• (i) Government can fix the minimum wages
rate and working hours.
(ii) Government can provide cheap loans to
the self employed people.
(iii) Government can provide cheap and
affordable basic services like education,
health, food to these workers.
(iv) Government can frame new laws which
can provide provision for overtime, paid leave,
leave due to sickness, etc

26. • Creation of more employment
opportunities in organised sector.
: Reservation of jobs.
: Unemployed allowances.
: Implementation of rules for the
protection of labourers.
: Providing cheap and affordable credit.

27. • Labourers in construction work are employed on
a daily basis. They have no job security. Their
wages differ from time to time. So govt. has set
up minimum wages act. this protects them from
economic exploitation.
• Miners working in private companies have no
job security. Their safety is secondary to
companies' profits. Govt. has laid down strict
rules to protect them.
• Most companies in unorganised sector do not
provide health facilities to their employees. Most
of them are involved in dangerous factory
production. Here govt. takes steps to protect such
workers.

28. • Landless agricultural labourers, small and
marginal farmers , artisans etc. need to be
supported through adequate facility for timely
delivery of seeds, agricultural inputs, credit ,
storage and marketing facilities
• Workers in small scale industries,
construction work, trade, transport, vendors
etc. should be provided support for procuring
raw material and their marketing.
• Workers from SC, ST and OBC have to be
provided with regular and fair paid work

29. • Divisions of sectors on the basis of
ownership:
• (i) Public sector and (ii) Private sector
• In public sector ,resources of the country are
owned by the government. On the other
hand, in private sector, resources are owned
by the private individuals. The main aim of the
public sector is the welfare of the people, on
the other hand, the main aim of the private
sector is the maximization of profit.

30. • Though both public and private both the
sectors provide various goods and services to
the people in a country like India where the
country follows the mixed economic principle,
some of the services must be always in the
hands of the government. The reasons are-
1.Greater equality –the government
redistribute income and wealth to improve
equality of opportunity and equality of
outcome.

31. 2.Some of the services need spending large
sum of money, which is beyond the capacity
of the private sector. So, governments have to
undertake such heavy spending and ensure
that these facilities are available for everyone.
3. There are some activities, which the
government has to support. For example
producing and supplying electricity to the
small-scale units at rates which these
industries can afford. Government has to bear
part of the cost.

32. • 4. The government needs to support both the
farmers and consumers. The government
supports the farmers by buying the surplus
food crops from the farmers at a ‘fair price’. The
government also support the consumers by
selling those food crops to the consumers at a
lower price through ration shops.
• 5. To provide some of the services is the prime
responsibility of the government. For example,
providing health and education facilities for all.
So, the government must provide these
services as a part of its prime responsibility.

33. • 6. 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.

34. • Some other Needs :
Overcome market failure – Markets fail to take
into account externalities and are likely to
under-produce public/merit goods. For
example, governments can subsidised or
provide goods with positive externalities.
• Macroeconomic intervention. – intervention
to overcome prolonged recessions and reduce
unemployment.
• Disaster relief – only government can solve
major health crisis such as pandemics.