Economic activities

Economic activities refer to those activities which are concerned with the
creation of money and wealth or here

economic aspect and performed by people to earn living/ livelihood/money

for the satisfaction of their wants.

Economic activities are:

(A) Production

(B) consumption

(C) Investment

(D) Distribution

Production activities

Production activities refer to those activities which are concerned with the
production of goods services kinesin in orin addition to the flow of goods
and services. It is a part of economic activities.

Gross domestic product (GDP)

GDP refers to the total money value of all final goods and services
produced within the domes territory of a country during one year,

Worker

A worker is an individual who is engaged/ involved in productive activities in

any capacity (low or high), to earn a living and contributes to gross
domestic product (GDP). For example-farmer, manager, doctor, teacher,
broker etc.

Included in worker

1. All those who are engaged in productive activities

2. All those people who temporarily abstain from work due to illness,
injury or other physical disability, bad weather, festivals, social or
religious function or some other reasons.
3. All those people who help the main worker.
4. Those people who are self-employed.
Types of worker

There are two types of workers

(A) Hired workers

Those people who are hired/ employed or working for somebody else and
are paid wages or salaries by the employer in return for their productive
services. For example-doctor working in a hospital, teachers working in a
school etc.

It is broadly classified into two categories:

1. Regular salaried workers: Those people who are hired/employed by

their employer on a regular/ permanent basis and get social security
benefits like pension, provident fund etc. For example; Teacher
working in a school, doctors working in hospitals etc.
• They have strong bargaining power as they can form trade unions. It
accounts for nearly 15% of the workforce.
2. Casual workers: Those people who are not hired/employed by their
employer on a regular/permanent basis and do not get social security
benefits like pension, provident fund etc. For example-construction
workers.
• They do not have strong bargaining power as they cannot form trade
unions. It accounts for nearly 33% of the workforce.
(B) Self-employed workers
All those people who are engaged in their own business or own profession
and use their resources to make a living. For example shopkeepers,
traders, businessmen etc.

It is the main major source of livelihood for both men and women and
accounts for 50% of the workforce.

Working facilitates/Helps

1. for earning a living

2. Being employed in work gives a sense of self-worth or self-esteem
and enables a person to relate with others.
3. Enable a person to contribute to national income or gross domestic
product.
4. for those who depend on us.
5. Help in understanding the quality and nature of employment in a
country.
6. Help in understanding and planning human resources.
7. Help in analyzing the contribution made by different industries and
sectors.
8. Helps to address many social issues such as exploitation, child
labour etc.
Workforce

The number of people who are employed or working or engaged in

economically productive activities at a

a particular point in time.

• It does not include unemployed persons even if they are willing to

work or available for work at a particular wage.
Labour force

All those persons, who are working or employed and though not working,
are seeking and are available for work
 • It includes both employed and unemployed persons in the age group
between 15 years.
• It increases with an increase in population.
It does not include;

• Children below 15 years and old people above 60 years.

• Handicapped persons.
• Those who are not willing to work or available to work.
Labour Force = working persons + willing to work and available for work
or not working but are seeking work.

= Workforce + willing to work and available for work or not working but are
seeking work.

= employed persons + unemployed persons

So, Unemployed persons = labour force – workforce.

Labour supply

It refers to the amount of labour that workers are willing to offer to

correspond to a particular wage rate. It is measured

in terms of man-days of work (one day is equal to 8 hours).

• It may increase or decrease even when several workers remain

constant.
Employment

Employment is an activity that enables a person to earn.

Rate of unemployment =No. of unemployed persons ÷ Labour force x 100.

Size of workforce

1. India has a workforce of nearly 487 million persons in 2012.

2. Out of this, about 70% of the workforce is in rural areas (about % of
the total workforce) and 30% is in urban areas.
3. About 70% of the workforce is men and 30% are women.
4. Women workforce account for 30% (about 1/3) of the total rural
workforce and in urban areas, it is only 20 % (1/5 of the total urban
workforce).
Why the proportion of the female workforce is lower than men:

(a) Low level of female education which implies low employment

opportunity for women.

(b) Job work for women is still governed by family decisions rather than
individual decisions and families discourage female members from taking
up jobs.

(c) Many activities performed by them in India are not recognized as

productive/ economic activities like cooking, rearing the children, washing
the clothes, cleaning the utensil etc. This leads to the underestimation of
women workers in India.

Besides it, women rendering services in family farms in rural areas and the
family business in urban areas are not treated as workers

Why female workers in urban areas are still lower than rural areas:

(a) In urban areas, men can earn high incomes. Therefore, families
discourage female members from taking jobs.

(b) In rural areas, poverty forces women to seek jobs but without education,
they are engaged in less productive jobs and get low wages just to add to
their family income.
Why total workforce in rural areas is more than urban areas:

(a) People in rural areas have limited resources to earn a higher income
whereas there are varieties of employment the opportunity of higher
income in urban areas.

(b) In rural areas, people cannot stay at home because of their poverty.
Poverty compels/ forces them to avoid education and seek employment. In
urban areas, people can study in various educational institutions. They give
priority to education and do not take up jat obs at an early age.

(c) In urban areas, people have a variety of employment opportunities.

They look for the appropriate jobs to suit their qualifications and skills.

Worker population ratio or work participation rate/ ratio

• It refers to the percentage of the population participating in production

activities.
• It is calculated by dividing the total number of workers by the
population and then multiplying by 100.

Rate of Participation = Total workers or workforce ÷ Total population

×100.

1. It is very useful in determining the proportion of the population that is

actively contributing to the production of
2. It is an indicator that is used for analyzing the employment situation in
an economy.
3. A higher ratio implies high participation in economic activities and
vice-versa.

Rate of participation in India

1. In India rate of participation is about 39% which is lower compared to

the developed countries. It implies that for every 100 persons, 39%
are workers in India. It implies low participation in economic activities
and points to a high dependency ratio.
Reasons:

• Children below the age of 15 years constitute 37% of the total

population which is around 20% in developed countries.
• The low proportion of working women.
• The rate of participation for the urban areas is about 36% whereas in
rural areas it is about 40%.
• The rate of participation for rural areas is higher than in urban areas.
• People in rural areas have limited resources to earn a higher income
whereas there are varieties of employment opportunities of higher
income.
• In rural areas, people cannot stay at home because of their poverty.
Poverty compels/ forces them to avoid education and seek
employment. In urban areas, people can study in various educational
institutions. They give priority to education and do not take up jobs at
an early age.
• In urban areas, people have a variety of employment opportunities.
They look for the appropriate jobs to suit their qualifications and skills.
4. WPR for males was nearly 54% per cent and it was 22% per cent for
females.
5. In urban areas, the rate of participation is about 55% for men and
15% for women.
6. In rural areas, the rate of participation is about 54% for men and 25%
for women.
7. The rate of participation for women in rural areas is higher than in
urban areas.
Reasons:

• In urban areas, men can earn high incomes. Therefore, families

discourage female members from taking up jobs.
• In rural areas, poverty forces women to seek jobs but without
education, they are engaged in less productive jobs and get low
wages just to add to their family income.
Distribution of workers by gender

1. In India, self-employment is a significant source of livelihood because

of:
 • A low literacy rate implies the low acquisition of skills for wage/hired
employment.
• Lack of mobility due to the diverse social environment.
• Less generation of wage employment in India.
2. Among women, self-employment is a more significant source of
livelihood.

Reasons:

• Owing to family and social constraints, the mobility of women workers

in search of jobs remains low.
• In rural areas. ample opportunities of self-employment for women and
they are engaged in traditional jobs like spinning, weaving, dyeing,
bleaching etc.
3. In regular salaried employment, the proportion for male is 18%
whereas female accounts for only 8% because regular salaried
employment/jobs require skills and a higher level of literacy. So,
women might not have been engaged to a great extent.

Distribution of workers by region

1. Self-employment is a major source of livelihood in both rural and

urban areas but in rural areas, it is more than in urban areas
Because;
• In urban areas, people look for skilled jobs in offices and factories
while in rural areas agriculture is a major source of livelihood and
majorities of people are engaged in farming on their own farms/lands.
• In rural areas, non-farm jobs opportunities are limited.

2. Regular salaried workers in urban areas are greater than in rural

areas because:
• In urban areas, the nature of employment/jobs is different and
enterprises require workers on regular basis.
• Urban people have a variety of employment opportunities because of
educational attainments and skills.
• In rural areas, due to lack of skills and literacy, only 7% of people are
engaged in regular salaried employment.
Distribution of employment/ workforce by industry or in different
sectors

Distribution of workforce by industry means distribution of the working

population (workforce) across different producing sectors namely primary
sector, secondary sector and tertiary (service) sector.

• The primary sector includes agriculture, forestry, mining and

quarrying, fishing etc.
• The secondary sector includes manufacturing, construction,
electricity, gas and water supply etc.
• The tertiary sector (service sector) includes trade, transport and
storage, services etc.

1. The primary sector is the major source of employment. About 49% of

the total workforce are engaged in the primary sector and depend on
it for their livelihood.
2. The tertiary sector is the next/ second major source of employment
and accounts for 27%the of the workforce.
3. The secondary sector employs only 24% of the total workforce.
4. A large segment of the workforce continues to depend on the primary
sector for la livelihood because secondary and tertiary sectors have
failed to generate sufficient employment opportunities. It points to the
economic backwardness of the country.
5. Both male and female workers are heavily engaged/ employed in the
primary sector. About 75% of women workers engaged/ employed in
the primary sector whereas about 54% of men workers engaged in
the primary sector because secondary and tertiary sectors have failed
to generate sufficient opportunities for employment and to absorb
surplus labour from agriculture.
6. The tertiary sector is a major source of employment for people in
urban areas because after the implementation of new economic
policy, trade, commerce, banking, insurance, health, education,
tourism and other related services have been developing faster than
manufacturing and allied production activities and the service sector
is has been taking a lead over the secondary sector as a source of
employment in urban areas.
7. The primary sector in rural areas is the main source of employment.
About 77% of the workforce in rural areas is engaged in the primary
 sector whereas; only 10% of the workforce is employed in urban
areas.
8. About 75% of total female workers are engaged in the primary sector
whereas; it employs 54% of total male workers because:
• Men get more opportunities in both secondary and tertiary sectors.
• Lack of mobility among females due to family as well as social
constraints. They prefer to work at their place of residence even at a
low wage rate.
• Poverty force/ compels women to do work as casual workers on the
farm and field of others.

Jobless growth

• Economic growth refers to an increase in the level of output

(production of goods and services) which can achieve in two ways;
(A) Through greater employment

(B) Through better/ innovative technology

• In poor countries like India, economic growth becomes meaningful

only when it is associated with greater employment opportunities. If
economic growth is driven only by innovative technology, it will fail to
improve the level of employment in the economy.
• During the recent past, the GDP of India grew positively from 3.6% to
8% per annum but the growth rate in employment has declined
sharply from 2.04% per annum during the period 1983 to 1993-94 to
just .98% per annum during the period 1993-94 to 1999-2000 and
reached the level that India had in the early stage of planning. The
gap between the growth of GDP and employment was widening. This
trend is termed “jobless growth”.
Jobless growth refers to a situation when the economy can produce more
goods and services without a corresponding increase/ expansion of
employment.

Or
Jobless growth refers to a situation when the level of output in the economy
tends to rise owing to innovative technology without a corresponding rise/
increase in the level of employment.

Reasons/ causes

Our economic growth is being hijacked by multinational companies (MNCs)

which use efficient/ innovative technology to achieve high growth rather
than through greater use of manpower.

Casualisation of workforce

• Over the last four decades, there was a considerable/ significant shift
of self-employed and regular salaried employed to casual workers, as
shown in the above schedule.
The process of moving from self-employed and regular salaried
employment to casual employment is known as the casualisation of
the workforce.

It refers to a situation when the percentage of casual hired workers tends to

rise and the percentage of self-employed workers and a regular salaried
worker tends to fall in total workforce overtime)

Reasons/ causes

1. Low scope of earning in agricultural activities.

2. Displacement of workers from large industries.
3. The slow growth of employment in the organized sector.
4. Increase in demand for casual labour in expanding construction,
trade and service sector.

In formalisation of workforce

Employment may be broadly classified into two sectors as follows:

(A) Formal or organized sector All the government/ public enterprises and
private sector establishments which employed 10 or more hired workers
are called formal or organized sectors.

1. Workers who are engaged/ employed in the formal/ organized sector

are known as formal workers.
2. These workers are entitled to social security benefits such as
provident fund, gratuity fund, pension etc.
These workers can form trade unions and have strong bargaining power.

3. this worker can form trade unions and have strong bargaining power.
4. Their right is protected by labour law.
5. About 29.22 million are employed in the formal/ organized sector
which is 6% of the total workforce.
6. Out of 29.22 million workers, 24.25 million (83% of 29.22 million) are
male and only 4.97 million (17%) are female.
(B) Informal or unorganized sector

All the private sector establishments which employed less than 10 hired
workers are called informal or unorganized sectors. For example-small
farms, household industries, small enterprises, self-employed etc.

1. Workers who are engaged/ employed in the informal/ unorganized

sector are known, informal workers.
2. These workers are not entitled to social security benefits such as
provident fund, gratuity fund, pension etc.
3. These workers cannot form trade unions and do not have strong
bargaining power.
4. Their rights are not protected by labour law.
5. About 457.78 million are employed in the informal/ unorganized
sector which is 94% of the total workforce.
6. Out of 457.78 million workers, 315.82 million (69% of 457.78 million)
are male and only 141.91 million (31%) are female.
In formalisation of force refers to a situation in which a percentage of
the total workforce in the formal sector tends to decline the and
percentage of the total workforce in the informal sector tends to rise
over time.
Labour in India refers to employment in the economy of India. In 2012,
there were around 487 million workers, the second largest after China.

Reasons for formalisation

1. After the introduction of economic reforms in 1991, there is a

significant transformation from a controlled economy to a market
economy which encouraged privatization and disinvestment.
2. Formal sectors tend to shift to capital intensive technology to be more
efficient and competitive.
3. Relaxation of labour law permits retrenchment of labour. Therefore,
producers do not prefer to employ regular

Importance and protection of the informal sector

Due to the failure of the formal sector in generating employment, India

started paying attention to informal sector enterprises and workers. With
the efforts of the international labour organization (ILO), the Indian
government has initiated the modernization of informal sector enterprises
and the provision of social security measures to informal sector workers.

UNEMPLOYMENT

Unemployment is one of the most serious problems/challenges which is

normally found in every country.

Unemployment refers to a situation in which all those persons who are able
(mentally and physically fit) and willing to work at existing/ prevailing wage
rate, but do not get employment/ work. It includes only involuntary
unemployment.

Followings are not counted in unemployment:

(a) Some people voluntarily remain unemployed like students. (voluntary

unemployed)
(b) Persons below 15 years of age and persons above 60 years of age.

(c) Physically disabled persons.

Sources of unemployment data

(a) Reports of the census of India.

(b) National sample survey organization (NSSO)’s a report of employment

and unemployment.

(c) Estimates/ information of employment provided by Directorate General

of Employment and Training (DGET)

(d) Data of registration with employment exchange.

Types of unemployment

• Disguised unemployment – a situation when people are working

but all of them are made to work less than their potential is called
disguised unemployment.
• Seasonal unemployment – Situation in which people are
unemployed for some particular months ( off-season ) of the year and
employed for the rest of the year.
• Open unemployment – a situation in which all those who are willing
and able to work at the existing wage rate, doesn’t get work.
• Under unemployment- a situation in which worker is employed in
less than full-time.
• Structural unemployment- unemployment with caused by a bridge
between skills a worker can offer and skills the firm requires.
• Frictional unemployment- unemployment which exists at the time
when a worker leaves one job and takes other
• Cyclic unemployment- unemployment which arises due to
fluctuations in business.
• The educated unemployment situation is which the educated person
doesn’t have the right kind of job for him.
Causes of Unemployment

1. Population expansion.
2. Low economic development.
3. Backward and stagnant agriculture.
4. The decline in cottage and small scale industries.
5. Defective education system.
6. Poor infrastructure.
7. Low Capital Formation.
8. Low rate of investment.