The document discusses the classification of sectors in the Indian economy based on three criteria: nature of activities, working conditions, and ownership. The primary sector involves activities like agriculture, mining, and fishing that directly use natural resources. The secondary sector includes manufacturing and construction industries that process raw materials. The tertiary sector provides services to support the primary and secondary sectors in areas like transportation, banking, and communication. Organized sectors have formal employment and regulations while unorganized sectors have informal jobs. Public sectors are government-owned and prioritize public welfare, while private sectors are owned by individuals and aim to generate profits. The Indian economy has evolved from primarily relying on the primary sector to now being more service-oriented in the tertiary sector.

1. Sectors of
Indian economy

2. What is economy ?
 Economy is a framework in which
economic activities take place and
therefore gives income in return .
 we divide them into sectors .

3. CLASSIFICATION OF SECTORS
A. ON THE BASIS OF NATURE OF ACTIVITIES BEING
PERFORMED
1. primary sector
2. secondary sector
3. tertiary sector
B. ON THE BASIS OF WORKING CONDITIONS OF
THE WORKER
1. organized sector
2. unorganized sector
C. ON THE BASIS OF OWNERSHIP
1. public sector
2. private sector

4. A. ON THE BASIS OF NATURE OF ACTIVITIES BEING
PERFORMED
1. PRIMARY SECTOR
• It is the sector of an economy making direct use
of natural resources.
• It is called primary sector because it forms all the
base for all other products that we subsequently
(afterwards) make.
• This includes agriculture, forestry and fishing,
mining & quarrying. In the primary sector, they
may consume the natural resourses and their
reproduction may take many years.

5. 2. SECONDARY SECTOR
• Also called industrial sector (this sector is associated
with different kinds of industries) includes
those economic sectors that create a finished,
tangible product i.e. production of
goods and construction.
• It is the next step after primary where the product is
not produced by nature but has to be made.
• The industrial sector generally takes the output of
the primary sector and manufactures finished goods.
• Many of these industries consume large quantities of
energy and require factories and machinery to
convert the raw materials into goods and products.

6. 3. TERTIARY SECTOR
• Also known as the service sector or the service industry
as it involves providing intangible goods).
• It helps to develop the primary and secondary sectors.
These activities do not produce good but they are in aid
and support to the production process.
• For example :
– transportation –produced goods need to move by truck or
rail etc from factory to consumers.
– Storage: to store them at one place.
– Communication :talking to clients/people on phone.
– Banking : borrowing money from the banks.

7. B. ON THE BASIS OF WORKING
CONDITIONS OF THE WORKER

8. Organized sector Unorganized sectors
The organized sectors cover those
enterprises where the term of employment
is regular .
The unorganized sectors is characterized
by small and scattered units which are
largely outside the control of government
They are registered by government , they
follow rules and regulations and various
laws such as , the factories act , minimum
wages act , payment of gratuity , shops and
establishments act .
Unorganized sector does not follow any
rules and regulation pass by the
government .
Workers in the organized sector are paid
according to prescribed scale . They also
get payment in time on regular basis ,
Most of the jobs are low paid and often
not regular .
They get annual increment and other
allowances such as provident fund ,
payment during holidays , paid leave ,
gratuity , medical benefits , safe working
conditions
There is no provision of over time , paid
leave , holidays , leave due to sickness etc.
They can form trade unions They cannot form trade unions

9. Workers under unorganized sector need
protection
• They are paid low salaries , therefore they are not
able to fulfill even there basic needs .
• They are exploited .
• Employment is there but not on regular basis they
can be thrown out any time without any reason .
• Other than salary which is very low they don’t get
any other benefits .
• These workers also face social discrimination .
• protection and support to the unorganized sector is
both necessary for economic and social
development .

10. C. ON THE BASIS OF
OWNERSHIP

11. PUBLIC SECTOR PRIVATE SECTOR
It is owned by state or central
government .
It is owned by private individuals .
They work with the main motive of
providing service to the public
They work for profit earning .
It is guided by social objectives like
development of backward regions
, creation of employment , and
equitable distribution of wealth .
In this sector social objectives are
not important it is subjected to
strict financial control of the
government .
For example , railways , air india ,
LIC , RBI , FCI .
Foe example , reliance industries
limited , tata iron and steel
company limited .

12. 1. PUBLIC SECTOR
• organized by govt.
• provide facilities to the workers like-fixed
employment,fixed working hours.
• Main aim is to provide public welfare.
• More relaxed atmosphere.
Example- Indian railway ,hospitals, libraries, park
etc.

13. 2. PRIVATE SECTOR
• organized by private individuals.
• More opportunities for promotion as the company
grows.
• No fixed employment and no fixed working hours.
• More efficiency than public.
• Main aim is to make profit for themselves.

14. EVOLUTION OF AN ECONOMY FROM PRIMARY
SECTOR BASED TO TERTIARY SECTOR BASED
• During early civilization all economic activity was in
primary sector.
• When the food production became surplus people’s need
for other products increased. This led to the development
of secondary sector. The growth of secondary sector
spread its influence during industrial revolution in
nineteenth century.
• After growth of economic activity a support system was
the need to facilitate the industrial activity. Certain sectors
like transport and finance play an important role in
supporting the industrial activity. Moreover, more shops
were needed to provide goods in people’s neighbourhood.
• Ultimately, other services like tuition, administrative
support developed.

15. ECONOMIC ACTIVITIES ARE HIGHLY
INTERDEPENDENT ON EACH OTHER
• To understand this interdependency, let us take an
example of a cold drink. A cold drink contains
water, sugar and artificial flavour.
• Suppose if there is no sugarcane production then
procuring sugar will become difficult and costly for
the cold drink manufacturer.
• Now to transport sugarcane to sugar mills and
sugar to the cold drink plant needs the services of a
transporter.

16. • A person or group of persons is required to
maintain and monitor all these movements of
goods from farm to factory to shop in different
locations. That is where role of administrative
staffs comes.
• He also needs fertilizers and seeds which is
processed in some factory and which will be
delivered to his doorstep by some means of
transportation.
• To top it all at every step of these activities we
require the proper monetary and banking
system.

17. COMPARING THE THREE SECTORS
• We count only final goods and services and not the
intermediate goods as the value of final gods already
includes the value of all intermediate goods .
• 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 us the
GDP .
• The finance ministry , with the help of various
government department of all the Indian states and
union territories estimates the GDP.

18. ROLE OF GOVERNMENT / PUBLIC SECTOR IN THE
ECONOMIC DEVELOPMENT OF THE COUNTRY .
• Infrastructure : construction of roads , bridges ,
generating electricity , irrigation , education etc. are
several things needed by society , but private sector
could not invest as large amount of money is required .
• Also collecting money from thousand of people is not
easy .
• Hence government has to undertake such heavy
spending and ensure creation of infrastructure .

19.  Public welfare : providing health , housing facilities
, safe drinking water , food and nutrition for poor
are the primary responsibilities of the
government.
 These activities should be taken up by the
government as private sector would like to
maximize there profits and has no interest in
public welfare .

20. PROBLEMS FACING INDIAN ECONOMY
1. Inflation
• Fuelled by rising wages, property prices and food prices. inflation in
India is an increasing problem. Inflation is currently between 6-7%.
2. Poor educational standards
• Although India has benefited from a high % of English speakers.
(important for call centre industry) there is still high levels of illiteracy
amongst the population. It is worse in rural areas and amongst women.
Over 50% of Indian women are illiterate.
3. Poor Infrastructure.
• Many Indians lack basic amenities lack access to running water. Indian
public services are scratching under the tension of bureaucracy and
inefficiency. Over 40% of Indian fruit decays before it reach the market;
this is one example of the supply constraints and inefficiency’s facing
the Indian economy.
4. Balance of Payments decline (balance of payments is a system of
recording all of a country's economic transactions with the rest of the
world over a period of one year; "a favorable balance of payments exists
when more payments are coming in than going out")

21. 5. High levels of debt.
• maintained by a property boom the amount of lending in India has grown by 30% in the
past year. However there are concerns about the risk of such loans. If they are
dependent on rising property prices it could be problematic. Furthermore if inflation
increases further it may force the RBI to increase interest rates. If interest rates rise
substantially it will leave those indebted facing rising interest payments and potentially
reducing consumer spending in the future
6. Inequality has risen rather than decreased.
• It is hoped that economic growth would help drag the Indian poor above the poverty
line. However so far economic growth has been highly uneven benefiting the skilled and
wealthy disproportionately. Many of India’s rural poor are yet to receive any tangible
benefit from the India’s economic growth. More than 78 million homes do not have
electricity. 33% (268million) of the population live on less than $1 per day. Furthermore
with the spread of television in Indian villages the poor are increasingly aware of the
disparity between rich and poor. (3)
7. Large Budget Deficit.
• India has one of the largest budget deficits in the developing world. Excluding subsidies
it amounts to nearly 8% of GDP. Although it is fallen a little in the past year. It still allows
little scope for increasing investment in public services like health and education.
8. Rigid labour Laws.
• As an example Firms employing more than 100 people cannot fire workers without
government permission. The effect of this is to discourage firms from expanding to over
100 people. It also discourages foreign investment. Trades Unions have an important
political power base and governments often shy away from tackling potentially
politically sensitive labour laws.

22. Strengths of Indian Economy
• After several decades of sluggish growth, the Indian economy is now amongst the fastest growing
economy in the world. Economic growth is currently 8-9%, second only to China.
• Despite several problems facing the Indian economy many economists point to potential strengths of the
Indian economy which could enable it to continue to benefit from high levels of economic growth in the
future.
• Demographics of India are favourable.
• India still has a positive birth rate meaning that the size of the workforce will continue to grow for the
predictable future. (unlike India) A rising workforce helps to increase saving and investment. It also
enables increased productivity.
•
• There is much scope for increases in efficiency.
• The infrastructure of India is so bad in places that even moderate improvements could lead to significant
improvements in the productive capacity of the economy.
•
• India is well placed to benefit from globalization and outsourcing.
• A legacy of the British Empire is that India has one of the largest English speaking populations in the
world. For labour intensive industries like call centres India is an obvious target for outsourcing. This is an
economic development likely to continue in the future.
•
• Positive Growth Forecasts
• A recent study from Goldman Sachs, forecast that India could grow at a sustainable rate of 8% growth
until 2020.However it is worth noting that this assumed Indian would make several supply side policies
such as labour market deregulation and improvements in education and training.

23. • Services sector has been a major contributor to
India’s GDP and growth.
• It is the second largest employer after
agriculture. India’s trade in services have
increased overtime and services accounts for the
largest share in India’s foreign direct investment
(FDI) inflows and outflows.

24. BACKWARD LINKEAGE : can be defined as "the growth of an industry
leads to the growth of the industries that supply inputs to it".
As in the case of cotton industry, growth of the textile industry may support the
growth of the cotton industry, which will lead to higher incomes for cotton farmers
and will create a greater demand for goods and services in the countryside.
Direct backward linkages and indirect linkages; for example, the auto industry
has a direct backward linkage to the steel industry and an indirect backward
linkage to the coal and iron industries (since coal and iron are inputs to steel
production)
Backward linkage is a channel used between a company and its suppliers to make
a flow of information, material and money by creating an economic
interdependence.
FORWARD LINKEAGE :exist when the growth of an industry leads to the
growth of other industries that uses its output as input. The final product of cotton
goes to consumers either through retailers or through manufacturers who open up
their own shops to directly sell to consumer, thereby minimizing the role of
retailers in the channel process. A company can minimize cost of production and
can maximize revenue when both backward and forward linkages work together in
effective way. Forward linkages are a distribution chain that connects a producer
with the customers.