Sectors of Indian Economy

ECONOMY
An economy is a system of
organizations and institutions that
either facilitate or play a role in the
production and distribution of goods
and services in a society

Activities that generate

some income- economic
activity.
 ECONOMIC ACTIVITIES

Primary Secondary Tertiary

Sector Sector Sector
PRIMARY SECTOR SECONDARY SECTOR TERTIARY SECTOR

❏ Natural products ❏ Helps in

❏ Forms base are changed into development of
for all other forms the primary and
other products. through secondary
manufacturing sectors.
❏ Example: process.
Fishing, ❏ Example: Flour ❏ Example:
Agriculture, Mills, Banking,
Dairy, construction, etc. Transport,
Forestry, etc. Communication,
etc.
COMPARING THE THREE
SECTORS
The various production activities in
the primary, secondary and tertiary
sectors produce a very large number
of goods and services.

In an economy there could be one or

more sectors which are dominant in
terms of total production and
employment, while other sectors are
relatively small in size.
How do we count the various goods and
services and know the total production in
each sector?

Should I count
Final goods, raw
material, or
everything?
Raw Materials : Basic products required to
produce intermediate/final goods is known
as Raw Materials.

Intermediate Products : An intermediate good

is a product used to produce a final good or
finished product.

Final Goods : A final goods or consumer goods

is a commodity that is used by the consumer to
satisfy current wants or needs, unlike
intermediate goods which is utilized to produce
other goods.
 Final Goods Intermediate Goods
1. These are used for final consumption. 1. These are used for further production.

2. They are ready for use by final users. 2. They are not used by final users.

3. They are made by using 3. They are used as raw material

intermediate goods. for production of final goods.

4. They are finished goods. 4. They are unfinished goods.

5. Their value is calculated for GDP. 5. They are not calculated, as the value
of final goods include the value of
Example: Biscuits are final goods. intermediate goods.

Example: Flour, milk and sugar are

intermediate goods used in making
biscuits.
Calculation of GDP
. 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.

And the sum of production in the three sectors gives what is

called the Gross Domestic Product (GDP) of a country.

Definition : It is the value of all final goods and services

produced within a country during a particular year.

GDP shows how big the economy is. GDP is undertaken by a

central government ministry.
Historical Change in Sectors
 Generally, in the histories of many, now developed,
countries at initial stages of development, primary sector
was the most important sector of economic activity.

As the methods of farming changed and agriculture sector

began to prosper, it produced much more food than before.

Many people could now take up other activities. There were

increasing number of craft persons and traders.

Over a long time (more than hundred years), and especially

because new methods of manufacturing were introduced,
factories came up and started expanding.
 Those people who had earlier worked on farms
now began to work in factories in large numbers.

Secondary sector gradually became the most important in

total production and employment.
Hence, over time, a shift had taken place.

In the past 100 years, there has been a further shift from
secondary to tertiary sector in developed countries.

The service sector has become the most important in terms of

total production. Most of the working people are also employed in
the service sector.
Rising Importance of the Tertiary
Sector in Production
 Over the forty years between 1973-74 and 2013-14,

India has witnessed growth in all three sectors particularly remarkable in

Tertiary sector.
 REASONS WHY TERTIARY SECTOR
IS BECOMING IMPORTANT

1. Information and communication technology have

become important and essential. Production of
these services has been rising rapidly.

2. Basic service increased like hospitals, education,

police, courts, municipalities, banks, transport etc.

3. Increase in income levels give rise to certain

other services for comfort and personal well
being such as dining out, tourism, etc.

4. Development in agriculture and industry leads to

development of services.
A remarkable fact about India is that while there has been a change in the share of the three
sectors in GDP, a similar shift has not taken place in employment.
 Why didn’t a
similar shift out of
primary sector
happen in case of
employment?
It is because:

More than half of the workers in the country are

working in the primary sector producing only a
quarter of the GDP.

It is because there are more people in agriculture

than is necessary. So, even if you move a few
people out, production will not be affected.

In other words, workers in agricultural sector

are under - employed.
 How to create more Employment

• Employment can be given to people by identifying, promoting and locating industries

and services in semi-rural areas.
• Every state or region has the potential for increasing the income and employment for
people in that area. It can be done by tourism, or regional craft industry, or new
services like IT.

The central government in India made a law implementing the Right to Work in about
625 districts of India, which is called the Mahatama Gandhi National Rural
Employment Guarantee Act (MGNREGA) 2005.
• Under MGNREGA 2005, all those who are able to and are in need of work in 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.
 ORGANISED SECTOR
• It is a sector where the employment terms are fixed and regular, and the
employees get assured work.
• Registered by the government and have to follow its rules and regulations.
• The job is regular and has fixed working hours. People get paid for the
overtime by the employer.
• Workers enjoy the security of employment.
• People get several other benefits from the employers, such as paid leave,
payment during holidays, provident fund, gratuity, etc.
• People get medical benefits. The employer has to ensure facilities like drinking
water and a safe working environment.
 UNORGANISED SECTOR
• The unorganised sector is characterised by small and scattered units, which
are largely outside the control of the government.
• There are rules and regulations but these are not followed since they are
not registered with the government
• Jobs are low-paid and often not regular.
• Employment is not secure.
• There is no provision for overtime, paid leave, holidays, leave due to
sickness, etc.
• Examples of the unorganised sectors are Shopkeeping, Farming, Domestic
works, Labouring, Rickshaw pulling, etc.
 How to Protect Workers in Unorganised Sector?

• There is a need for protection and support of the workers in the unorganised
sector.
• The government can fix the minimum wage rate and working hours.
• The government can provide cheap loans to self-employed people.
• Government can provide cheap and affordable basic services like education,
health, food to these workers.
• The government can frame new laws which can provide provisions for
overtime, paid leave, leave due to sickness, etc.
Sectors in Term of Ownership: Public and Private Sector
PUBLIC SECTOR PRIVATE SECTOR
The ownership of assets and delivery
The government owns most of the of services is in the hands of private
assets and provides all the services individuals or companies.

Companies like Tata Iron and Steel

Railways or post office is an example Company Limited (TISCO) or Reliance
of the public sector. Industries Limited (RIL) are privately
owned companies.

The purpose of the public sector is not Activities in the private sector are
just to earn profits. Its main aim is guided by the motive to earn profits.
public welfare.
 Responsibilities of the Government
• Government raises money through taxes and other ways to meet expenses on the
services rendered by it.
• Governments have to undertake heavy spending such as the construction of roads,
bridges, railways, harbours, generating electricity, providing irrigation through dams,
etc. Also, it has to ensure that these facilities are available for everyone.
• There are some activities which the government has to support to encourage the
private sector to continue their production or business.
• The government in India buys wheat and rice from farmers at a ‘fair price’ and sells
them at a lower price to consumers through ration shops. In this way, it supports both
farmers and consumers.
• Running proper schools and providing quality education, health and education
facilities for all are some of the duties of the government.
• The government also needs to pay attention to aspects of human development such
as the availability of safe drinking water, housing facilities for the poor, food and
nutrition, and taking care of the poorest and most ignored regions of the country.