Sectors of Indian Economy (Class X Eco-2)

Eco-2 Sectors of Indian Economy

Introduction – Look at the pictures in your text book, you will find that people are engaged in various economic activities.

                   Some of these are activities producing goods. Some others are producing servicing.

                   These activities are happening around us every minute even as we speak. How do we understand these activities? One way of doing this is to group them (classify) using some important criterion. These groups are also called sectors.

Classification of Activities

·         Indian economy can be classified into three types of sectors on the basis of nature of activity being performed – Primary, Secondary, Tertiary etc.

·         Classification on working conditions of the workers – Organized and Unorganized.

·         Classification on ownership basis – Public and Private.

Primary Sector

Ø  Activities undertaken by directly using natural resources.

Ø  Example—Agriculture, Mining, Fishing, Forestry, Dairy etc.

Ø  It is called primary sector because it forms the base for all other products that we subsequently make.

Ø  Since most of the natural products we get are from agriculture, dairy, forestry, fishing it is also called Agriculture and related sector.

Secondary Sector

Ø  It covers activities in which natural products are changed into other forms through ways of manufacturing that we associate with industrial activity.

Ø  It is a next step after primary, where the product is not produced by nature but has to be made.
Some process of manufacturing is essential; it could be in a factory, a workshop or at home.

Ø  Example: Using cotton fibre from plant, we spin yarn and weave cloth; using sugarcane as a raw material we make sugar or gur; we convert earth into bricks.

Ø  Since this sector is associated with different kinds of industries, it is also called industrial sector.

Tertiary Sector

Ø  These are the activities that help in the development of the primary & secondary sector.

Ø  These activities by themselves do not produce good but they are an aid and support to the production process. Example:

a) Transportation--Goods that are produced in the primary sector need to be transported by trucks or trains and then sold in the wholesale and retail shops;

b) Storage--at times it is necessary to store these products in godowns, which is also a service made available.

c) Communication --talking to others on telephone); or sending letters

d) Banking--borrowing money from the banks.

Ø  Since these activities are generate services rather than goods it is also called Service sector.

Let’s work these out – Page no.21

Comparing the three sectors - How do we count the various goods and services and know the total production in each sector?

GDP (Gross Domestic Production)

Ø  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.

Ø  And sum of production in three sectors give Gross Domestic Production—GDP of the country.

Ø  It is the value of all final goods and services produced within the country during a particular year.

Ø  GDP shows how big the economy is.

Ø  Measuring GDP is undertaken by the Central government ministry, with the help of various govt. Departments of Indian States and Union Territories.

Historical Changes in Sectors – 3 Stages

Initial Stage -After observing the changes that have come in the development patterns of the sectors, it has been found that

-          In the Initial stages of the development the Primary Sector was the most important sector of economic activity.

-          As the methods of farming changed and agricultural sector began to prosper, it produced much more food than before and many people could take-up many other activities which led to the increase in number of activities.

-          However at this stage most of the goods produced were natural products from the primary sector, hence most people were employed in this sector.

Second Stage - Over a long time(more than hundred years or so) because new methods of manufacturing were introduced, factories came up and started expanding.
-People began to work in factories in large numbers, and also people started using factory goods in large numbers as they were cheap.
-Secondary sector gradually became the most important in total production and employment. There was a shift and the importance of the sectors also changed.

Third Stage - In past hundred years, there has been a further shift from Secondary to Tertiary sector in the developed countries.
-The service sector has become the most important in terms of total production. Most of working people are also employed in the service sector.

Rising Importance of the Tertiary Sector in Production

Over Forty years between 1970-71 and 2010-01, production in the tertiary sector has increased the most, and it has emerged as the largest producing sector in India replacing the primary sector.

Role of Tertiary Sector in India

Transition shows level of country development, it improves specialization but it's better to avoid extending service part in economy over 40-50% of GDP. (share of sectors)

Why the tertiary sector becoming so important in India?

•       First, in any country several services such as hospitals, educational institutions, post and telegraph services, police stations, courts, village administrative offices, municipal corporations, defence, transport, banks, insurance companies etc. are required. These can be considered as basic services. In a developing country, the government has to take responsibility for these services.

•       Second, the development of agriculture and industry leads to the development of services such as transport, trade, storage etc.. Greater the development of primary and secondary sectors, more would be the demand for such services.

•       Third, as income level rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, professional training etc. We can see this change quite sharply in cities, especially in big cities.

•       Fourth, over the past decade or so, certain new services such as those based on information and communication technology have become important and essential. The production of these services has been rising rapidly.

•       However, not all the service sector is growing equally well. Service sector in India employs many different kinds of people.

•       At one end, there are a limited number of services that employ highly skilled and educated workers. At the other end, there are a very large number of workers engaged in services such as small shopkeepers, repair persons, transport persons et.. These people barley manage to earn a living and yet they perform these services because no alternative opportunities for work are available to them. Hence only a part of this sector is growing in importance.

Where are most of the people employed?

The primary sector employs the largest number of people in India.
--It is because not enough jobs were created in the secondary and tertiary sectors. As a result, more than half of the workers in the country are working in the primary sector, mainly in agriculture, producing only a quarter of the GDP. In contrast to this, secondary and tertiary sectors produce three-fourth of the produce whereas they employ less than half the people. This means the workers in agriculture are not producing as much they could.

Under-employment

Ø  It is a situation, where people are apparently working but all of them are made to work less than their potential. (There are more people in agriculture than is necessary)

v  if few people move out , it will not effect the production.

v  --it is hidden in contrast to the open unemployment where a person is clearly or visibly without job.

v  --it is also called disguised unemployment.

--this underemployment also happens in the other sectors for example there are thousands of casual workers in service sector in the urban areas as painters, plumbers, repair persons etc.

How to create more employment?

•       The government can spend some money or banks can provide loans for farmers. Suppose a new dam is constructed and canals are dug to irrigate many such farms. This could lead to a lot of employment generation within the agricultural sector itself reducing the problem of underemployment. Government can also invest in transportation and building of new roads.

•       Government can identify, promote and locate industries and services in semi-rural areas where a large number of people may be employed.

•       Eg. Opening cold storages could give an opportunity for farmers to store their products like potatoes and onions and sell them when the price is good.

•       Eg. Setting up honey collection centres – In villages near forest areas, we can start these centres where farmers can come and sell wild honey.

•       In India, 46.9% of the population belongs to the age group 5-29 years. Out of this, only about two-thirds are attending educational institutions. The rest are not— they may be at home or many of them may be working as child labourers. If these children are to attend schools, we will require more buildings, more teachers and other staff. A study conducted by the Planning Commission estimates that nearly 20 lakh jobs can be created in the education sector alone.

•       Similarly, if we are to improve the health situation, we need many more doctors, nurses, health workers etc. to work in rural areas.

•       Every state or region has potential for increasing the income and employment for people in that area. It could be tourism, or regional craft industry, or new services like IT. Some of these would require proper planning and support from the government.

•       For example, the same study by the Planning Commission says that if tourism as a sector is improved, every year we can give additional employment to more than 35 lakh people.

NREGA (National Rural Employment Guarantee Act 2005)

Ø  National Rural Employment Guarantee Act 2005.

Ø  started by the Central govt.

Ø  made a law implementing Right to work in 200 districts of India. Later extended to an additional 130 districts.

Ø  all those who are in need of work will get guaranteed 100 days work and if the govt. fails to do so, it will give unemployment allowances to them

Ø  the type of work that would in future help to increase the production from land.

Division of Sectors - Organized and Unorganized Sector

Organized Secor

•       Terms of employment are regular, so people have assured work.

•       Registered by the government. (Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops and Establishment Act etc)

•       Follows rules and regulations given in various laws

•       Enjoy security of employment

•       Has some formal processes and procedures. (paid OT)

Benefit from the employers

q  Paid leave, Payment during holidays,  Provident fund, Gratuity, Medical benefits

q  Workers get pension after retirement

Unorganized Sector

•       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.

•       Low paid jobs and are not regular.

Disadvantages from the employers

q  There is no provision for overtime, paid leave, holidays, leave due to sickness…..

q  Employment is not secure (low paid and often irregular)

q  It includes a large no. of people who are employed on their own doing small jobs such as selling on the streets or doing repair works.

q  Similarly farmers work on their own and hire labourers as and when they require. Some people can also be asked to leave the job .

How to protect Workers in the Unorganized sector?

•       Setting up small scale industries in semi-rural areas.

•       Storage facilities and marketing outlets.

•       Implementing many programmes such as NREGA 2005.

•        Creating job opportunities in service sector [schools, tourism, hospitals]

•       Allow credits at a lower rate.

Sectors in terms of Ownership – Public and Private

Public Sector

Ø  Organised by government

Ø  provides facilities to the workers like - Fixed employment , Fixed working hours.

Ø  main aim is to provide public welfare.

Ø  Examples of Public sector are - Indian Railways, hospital, parks, libraries etc.

Private Sector

•       organised by private individuals.

•       does not provide fixed employment & fixed working hours to workers.

•       main aim is to make many profits for themselves.

•       Examples of Private sector are - Birla Company (TISCO), Reliance (RIL)etc.

Qualities of Public Sector

v  Job security

v  Generous benefits

v  More relaxed atmosphere

Qualities of Private Sector

v  More opportunities for promotion as the company grows

v  These jobs tend to pay higher

v  More prestige, and the private sector is supposed more efficient

v   Less bureaucracy (system of govt)