CHAPTER 2

SECTORS OF THE INDIAN

ECONOMY
 Sectors on the basis of
NATURE OF ECONOMIC ACTIVITIES

• PRIMARY SECTOR

• SECONDARY SECTOR

• TERTIARY SECTOR
 Sectors on the basis of
NATURE OF ECONOMIC ACTIVITIES
• PRIMARY SECTOR
When we produce goods by exploiting
natural resources.
This sector is also called agriculture and
related sector.
Examples- agriculture, dairy, fishing,
forestry, etc.
 Sectors on the basis of
NATURE OF ECONOMIC ACTIVITIES
• SECONDARY SECTOR
Activities in which natural products are
changed into other forms through ways of
manufacturing.
It is also called industrial sector.
Examples- Iron and steel industry, cotton
textile, sugar industry, etc.
 Sectors on the basis of
NATURE OF ECONOMIC ACTIVITIES
• TERTIARY SECTOR
These activities generate services rather
than goods.
It is also called service sector.
Examples-transport, storage, trade,
insurance, communication, banking, etc.
COMPARING THE THREE SECTORS
How do we count the various goods and services and know the total
production in each sector?
1. Rather than adding up the actual number of goods and services,
the values ( Price X quantity) of goods and services should be
used.
2. Include the value of only Final goods and services.
Intermediate goods are used in producing final goods and services.
The value of final goods already includes the value of all
intermediate goods.
3. 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.
4. The sum of production in three sectors gives GROSS
DOMESTIC PRODUCT (GDP)of the country.
GROSS DOMESTIC PRODUCT

It is the value of all final goods and services

produced within a country during a particular
year.
 HISTORICAL CHANGES IN SECTORS
• 1. At initial stages of development, primary sector
was the most important sector of economic activity.
As the methods of farming changed and agriculture
began to prosper, it produced much more food than
before. Many people could take up other activities.
Buying and selling activities increased, there were
increasing number of craft persons and traders.
At this stage most of the goods produced were natural
products from the primary sector and most people were
also employed in this sector
 HISTORICAL CHANGES IN SECTORS

• 2. Over a long period of time, new methods of

production were introduced, factories came up and
started expanding. People began to use more goods
that were produced in factories.
Secondary sector gradually became the most important
in total production and employment.
Hence , overtime, a shift had taken place.
 HISTORICAL CHANGES IN SECTORS

• 3. Over a long period of time, there has been further

shift from secondary to tertiary sector.
The service sector became the most important sector in
terms of total production and employment.
This is the general pattern observed in developed
countries.
Primary , Secondary and Tertiary sectors in
India
Rising Importance of Tertiary Sector
 Rising Importance of Tertiary Sector

• i) In a country several services are required such as

hospitals, educational institutions , police stations,
courts, etc. comes under tertiary sector.
• These are considered as basic services.
• ii) Development of agriculture and industry leads to the
development of services such as transport, trade,
storage, etc.
• iii) As the income level increases people start demanding
more services like eating out, tourism, private hospitals,
etc.
• iv) Development of new services such as that of
information and communication technology have
become important and essential.
 Disguised Unemployment
• When more number of people are engaged in an
economic activity than required, if we remove extra
people from work, total production will not be affected.
• It is more prevalent in agricultural sector. Workers in
agricultural sector are underemployed.
• Though everyone is working, none remains idle, but in
actual fact their labour effort get divided.
• In this situation all are working but all of them are made
to work less than their potential.
• This type of unemployment is hidden in nature
 How to create more employment?
• Construction of dams and canals for irrigation will
generate employment opportunities.
• Government should invest in transport and storage
facilities.
• Credit should be provided at reasonable rate of interest
for purchase of inputs to carry out production activities.
• Promote industries in rural areas to provide employment
to a large number of people.
• Set up industries to process agricultural produce.
• Expansion of education and health care facilities in rural
areas.
• Expansion of tourism, regional craft or new services like
IT
 How to create more employment?
• Central government in India made a law implementing
the Right to Work in about 625 districts in India.
• It is called Mahatma Gandhi National Rural
Employment Guarantee Act 2005 ( MGNREGA 2005)
• Under this act, all those who are able to, and are in need
of, work rural areas 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
• The type of work that would in future help to increase
production from land will be given preferenece under this
act.
 Classification of sectors on the
basis of employment conditions
 Classification on the basis of
Ownership of Enterprise
PUBLIC SECTOR PRIVATE SECTOR
1.In the public sector , government 1.In private sector, ownership of
owns most of the assets and assets and delivery of services is in
provides services. the hands of private individuals or
companies.

2. Public sector activities are not 2. Private sector activities are

guided by profit motive. guided by profit motive.

3. Railways and post office are 3. TISCO and Reliance Industries

examples of public sector are privately owned
 Role of Public Sector
a) There are several things needed by the society as a whole which the private
sector will not provide at reasonable cost, therefore government needs to
spend on such activities like construction of roads, bridges, railways, etc.
b) There are some activities which the government has to support. For
example producing and supplying electricity at rates which industries can
afford.
c) Government buys wheat and rice from farmers and sells them at a lower
price to the consumers through ration shops.
d) There are large number of activities which are the primary responsibility
of the government such as education and health.
e) Government also needs to pay attention o aspects of human development
such as availability of safe drinking water, housing facilities, food and
nutrition.