SECTORS OF INDIAN ECONOMY

PART-1
1
 Economic
activities are
activities that
result in the
production of
goods and
services.

ECONOMIC
ACTIVITY 2
SECTORS OF INDIAN
ECONOMY
Three types of classification

Basis of
Economic Basis of Organization Basis of Ownership
Activity

Organised sector Private Sector

Primary Sector

Unorganised sector Public Sector

Secondary sector

Tertiary Sector
PRIMAR SECONDARY
TERTIAR
Y Y
ECONOMIC ACTIVITY
 CLASSIFICATION OF SECTORS ON
THE BASIS OF ECONOMIC ACTIVITY

 Economic activity- the activity concerned with production of goods and

services and hence earning of income is known as economic activity.
 Economy is classified into three sectors on the basis of economic activity

Primary Secondary Tertiary

sector sector sector
 PRIMARY SECTOR
Meaning: It includes activities carried with the help of natural resources.

Most of the natural products that we get are form agriculture, therefore this
sector is known as agricultural and related sector.

Importance: it provides raw materials to secondary sector in the absence of

which production cannot take place.

Example- Agriculture, fishing, mining and forestry.

7
 SECONDARY SECTOR
Meaning: It includes activities which involves transformation of raw materials
into finished goods.
Generally this transformation takes place in industries, therefore, the sectors is
known as manufacturing sector.

Importance: It converts raw material into finished goods. In its absence the raw
material will remain unutilised.

Example- manufacturing industries like car making, cloth making, sugar making
etc
9
 TERTIARY SECTOR
Meaning: Includes activities which renders services to the other two
sectors. These activities don’t produce a good but are a support for the
production process.
Also called as service sector as it generates services.

Importance: this sector is an important link between the other two sectors
which would not develop in the absence of this sector.

Example- Transportation, banking, communication, teaching etc.

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 INTERDEPENDENCE OF THE THREE SECTORS

The three Sectors are interrelated. One sector needs the help of another to
carry out production

On the next slide we will see an example of how the sectors relate together
in the production of cotton clothes, part of the fashion industry.
 COTTON IN THE FASHION
INDUSTRY...

PRIMARY
Cotton is grown and
picked on a cotton
farm
COTTON IN THE FASHION
INDUSTRY...

PRIMARY
Cotton is grown and picked
on a cotton farm SECONDARY
Cotton is processed to cloth,
which is, in turn, sewn in to
clothing.
 COTTON IN THE FASHION
INDUSTRY...

SECONDARY TERTIARY
PRIMARY Cotton is processed to Cotton clothes (eg
Cotton is grown and cloth, which is, in jeans, shirts etc) are
picked on a cotton turn, sewn in to sold in shops.
farm clothing.

In the process, many other services like banking, transportation,

communication, storage (godowns) etc are also needed.
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 HOW DO WE COUNT VARIOUS GOODS AND SERVICES AND
KNOW THE TOTAL PRODUCTION OF EACH SECTOR?

Concept of Final good and Intermediate good

 Final good- Final goods refer to the finished goods, which are sold in
the market.

 Intermediate goods:
All those goods, which are used by the producer for producing other
goods, are known as the intermediate goods.
nuts wheat
milk

Sugar, oil, essence Biscuit- Final good

etc
 Different goods produced in a sector may be measured in different units like Kg, Liters etc and hence
cannot be added together.
 Therefore, to find the total production of a sector, the monetary value of goods and services is added
up rather than adding up the actual numbers.
 Quantity of wheat= 50,000 Kg

Price per Kg= Rs 8

So, value of wheat= 50,000 X 8= Rs 4,00,000
Precaution to be taken:
While calculating the total production of a sector, the value of only the
final goods is included and not the intermediate goods. The value of final
goods already include the value of intermediate goods. If we also count
the value of intermediate goods, then it will lead to double counting, that
is, counting the value of a good more than once.

Biscuit
Farmer Flour mill consumer
company

Sells wheat @ Grinds it to flour Uses other ingredients

Rs 8/ Kg and sell it @ Rs and sells biscuit @ Rs
10/Kg 15/packet

Here, only the value of Biscuit (i.e Rs 15) will be counted as it

already includes the value of wheat and flour.
 GROSS DOMESTIC PRODUCT
(GDP)
 The value of goods and services produced in
each sector, in a particular year, is calculated and
added up. The sum of the production in three
sectors gives us the total production in a country,
called as, Gross Domestic Product.

 GDP- it is the value of final goods and services

produced within a country, during a particular
year.
CHANGE IN THE IMPORTANCE
OF SECTORS
Developed countries:
 In the initial stages of development, the primary
sector is the most important sector.

 With time, the shift has been seen from primary

to secondary to tertiary sector.
 THE SHIFT BETWEEN THE SECTORS IN CASE OF
INDIA
The shift between the sectors can be seen in two terms-

In terms of share
In terms of
of each sector in
employment in
GDP (total
each sector
production)

The shift has been seen The primary sector

from primary to continues to
secondary to tertiary employ the
sector maximum people
While there has been a change in the share of three sectors in
GDP, a similar shift has not taken place in employment.
210000 GDP by Primary, Secondary
200000 and Tertiary Sectors
190000
180000
170000
160000
150000 Share of agricultural sector has
140000 decreased and that of tertiary
130000
120000
sector has increased
110000 tremendously.
100000
90000
80000 Tertiary sector
70000
60000 Secondary sector
50000
40000 Primary sector
30000
20000
10000
1973 2003 23
Which sector do
you think has
grown the most
over last few
years?

24
Share of Sectors in GDP (%)
100%
90%
80% 35
70% 55 Tertiary sector
60%
50% Secondary sector
20
40%
30% 20 Primary sector
20%
10% 45
25
0%

Share of agricultural Primary sector- produces

sector in GDP has ¼th of the GDP
decreased and that of Secondary and tertiary
sectors- produces ¾ th of
tertiary sector has
GDP
increased.
 Share of Sectors in Employment (%)

100%
15
90%
22
80%
70% Tertiary sector
60%
50% Secondary sector
40%
75 60 Primary sector
30%
20%
10%
0%

Primary sector- employs more than half of the people

Secondary and tertiary sector- employs less than half of
the people.
NOTE: Though the share of primary sector in GDP has
declined, yet it employs maximum number of people.
THINK WHY???
WHY DOES PRIMARY SECTOR STILL CONTINUE TO EMPLOY MAXIMUM NO. OF
PEOPLE?

‘ IN INDIA, THERE HAS BEEN A CHANGE IN THE SHARE OF 3 SECTORS IN GDP, BUT
SIMILAR SHIFT HAS NOT TAKEN PLACE IN CASE OF EMPLOYMENT’ WHY?

‘ MORE THAN HALF OF THE WORKERS ARE WORKING IN PRIMARY SECTOR YET
PRODUCING ONLY A QUARTER OF GDP’ EXPLAIN.

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 REASONS:
 Enough job opportunities were not created in the secondary and tertiary sectors
though the output of the two sectors went up.
 Existence of underemployment and disguised unemployment in primary sector-
a) Primary sector employs more people in agriculture than required. Even if few
people are pulled out the production will not fall.
b) In this sector, people appear to work, but they are working less than their
potential and so are not fully employed.
c) Therefore there exists underemployment and disguised unemployment due to
which the contribution of primary sector to GDP is less even though it employs
more no. of people.
WHAT CAN THE GOVERNMENT DO IN THIS
CASE?
HOW CAN MORE EMPLOYMENT BE CREATED?

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 Division of sectors on the basis
of working conditions at
employment
Organised Unorganised
sector sector

The sector which

carries out all activity
through a system
and follows govt.
regulations.
The sector that evades
most of the laws and is
outside the government
control
Basis Organised sector
Terms of employment •Fixed working hours
•Overtime wages paid
•Appointment letter issued at the
time of appointment
•Salary received on fixed date
Unorganised sector
•No fixed working hours
•No overtime wages paid
•No appointment letter issued
•Irregularity in receiving salary

Government control •Registered with the •Outside the control of

government government
•Follows rules and regulations •Rules and regulations are not
given under various laws followed

Job security Security of job No job security. People may be

asked to leave anytime

Social security benefits Paid leaves, sick leaves, No paid leaves, sick leaves,
provident fund, medical benefits medical benefits etc are given.
etc are given
 HOW TO PROTECT THE WORKERS OF
UNORGANISED SECTOR?
 In Rural areas

In rural areas, people like cobblers, small and marginal farmers, weavers,
carpenters etc work in unorganized sector. They can be protected by:
a) Providing loans at low rate of interest.
b) Providing inputs at subsidized (low) rates.
c) Giving adequate storage and transportation facility.
d) Providing marketing outlets for sale of goods.
 In urban areas

In urban areas, workers in small scale industry, casual workers at construction sites, rickshaw pullers, rag
pickers etc are the ones working in unorganized sector. They can be protected by:

a) Providing loans at low rate of interest.

b) Giving support for marketing of output.
c) Helping in procuring raw materials.

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 Classification of sectors on the
basis of ownership of assets

Public
Private sector
sector

Ownership of the assets Ownership of the assets

and delivery of services and delivery of services
in the hands of few is in the hands of the
individuals. government.
Eg- Reliance, kingfisher Eg- MTNL, Indian
etc railways
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