30 August 2015

Chapter – 2 Sectors of the Indian Economy

CBSE NCERT Class X (10th) | Social Studies | Economics

Chapter – 2 Sectors of the Indian Economy

Introduction - Sectors of the Indian Economy

All the activities that involve the production and distribution of products and services are examples of economic activities. Economic activities are classified into three different groups i.e. primary sector, secondary sector and tertiary sector.
Primary sector include activities that use natural resources to produce natural goods like agriculture, dairy farming, poultry, fishing, mining, and forestry. The primary sector is also called the agriculture and related sector.

Secondary sector include activities that use natural products or other raw material for industrial manufacturing of goods. The secondary sector is also called the industrial sector.

Activities that support the manufacturing and distribution of goods produced in the primary and secondary sectors are called tertiary sector activities like education, healthcare, accounting, legal services, law and order, fire-fighting, and office administration. The tertiary sector is also called the services sector. The primary, secondary and tertiary sector economic activities are interdependent on each other.

Comparing Different Sectors

The primary, secondary and tertiary sectors of the economy involve the production of a large number of goods and services. Every product or service has a value.

The final values of goods are used to calculate the production in a sector. The sum of the total production in the three sectors in a year for a country gives the gross domestic product or GDP for that country in that year.

GDP is a globally accepted indicator of the size and health of a country’s economy. The contribution of different sectors to the GDP of a country depends on the state of development of that country’s economy. An economy starts developing based on natural resources and products, so at the initial stage of development, the primary sector is the biggest contributor to GDP.

In a developing economy, industrialisation creates fresh job opportunities and people use more and more manufactured goods. Here the secondary sector becomes the biggest contributor to GDP. In developed countries, people can afford and demand more services which leads to a rapid growth in the tertiary sector. Thus, the tertiary sector is the biggest contributor to the GDP. The tertiary sector has become the largest sector in India’s economy.

The tertiary sector has expanded due to:
  • The government’s initiatives for the expansion of essential services
  • The development of agriculture and industries support services
  • The rapid development and expansion of communication and information services 

Distribution and creation of employment

The tertiary sector has become the largest contributor to India’s GDP. The primary sector is the largest employer with more than 50% of the working population engaged in it.

The increase in production in manufacturing and services is not matched by an increase in employment opportunities in these sectors. The primary sector has a share of only 25% in the GDP, indicating its low productivity as more people than required are engaged in agriculture.

Removing a few workers would not affect agricultural production as some agricultural workers only appear to be employed. This is called underemployment or disguised unemployment. The surplus workers could be employed more gainfully elsewhere. Many workers in the manufacturing and services sectors suffer from underemployment.

More employment opportunities can be generated by:
  • Improving rural infrastructure
  • Providing easy, affordable loans to farmers to increase production
  • Promoting agro-based industries like crushers, grain polishing mills and cold storage facilities
  • Expanding education and healthcare services
  • Promoting the tourism sector
  • Proper implementation of employment generation schemes

NREGA guarantees 100 days of employment per year to every person willing to work, or an unemployment allowance if work is not provided. The National Rural Employment Guarantee Act is one such scheme launched by the Central government in 2005.

Organized and Unorganized Sector

Economic activities can be classified into organised and unorganised sectors depending on their conditions of employment.
  • The organized sector is characterized by:
  • Fixed working hours
  • Job security
  • Paid leaves and various other benefits

The unorganized sector is characterized by:
  • Irregular work
  • Job security
  • No benefits

However, people work in the unorganized sector as:
  • The organized sector has less job opportunities
  • Companies from the organised sector operate in the unorganised sector to save taxes and avoid giving the employees their due benefits.
  • In the last decade, a lot of people in the organised sector have lost their jobs

People who need protection in the unorganised sector:
  • Landless farm labourers
  • Small and marginal famers
  • Traditional artisans like weavers and potters.

The vulnerable groups in urban areas include:
  • Casual labourers
  • Street vendors
  • Rag pickers
  • People employed in small-scale industries

People from the scheduled castes and tribes need extra protection as they face social discrimination. 

Public and Private Sector

Based on the ownership, economic activities can be classified into public and private sectors.

An economic activity owned and managed by the government is called a public sector activity. An economic activity owned and managed by an individual or a group of individuals is called a private sector activity.

The main objective of private sector activities is to make a profit. The motive of public sector activities is to make a profit and also provide essential services.
The services provided by the government through the public sector are:
  • Basic essential services
  • Infrastructure development services
  • Community support services

It is the primary responsibility of the government to provide basic essential services like education, healthcare, housing, food and nutrition and safe drinking water to all the people. The private sector cannot provide such services at a reasonable cost. Private sector companies sell their products at a price higher than the production cost to make a profit and stay in business.

The government bears a part of the cost for some commodities to make them available at a reduced price to some sections of society.