Sectors Of

Indian Economy

Garv JainClass: X-ERoll No.: 12

The Indian economy can be classified into various sectors on the basis of ownership, working conditions of the workers and the nature of the activity being performed.

On the basis of nature of activity Indian economy can be classified into primary, secondary and tertiary sectors.

On the basis of working conditions economy can be classified into organized and unorganized sectors.

On the basis of ownership Indian economy can be classified into Public and Private sectors.

The primary sector, where economic activity is centered from extraction of raw materials from mother earth, be it agriculture, forestry, fishing, mining or quarrying.In India, agriculture is the biggest example of the primary sector. However, forestry and fishing can also be cited as other examples of this particular sector.This sector is also known as agriculture and related sector.

When the main activity involves

manufacturing then it is the secondary

sector. All industrial production where

physical goods are produced come under

the secondary sector.

In the secondary sector of the national

economy, natural ingredients are used to

create products and services that are

consequently used for consumption. This

sector can be regarded as one that adds

value to the products and services on offer.

The major examples of this sector are

manufacturing.

This sector is also known as industrial sector

When the activity involves providing intangible goods like services then this is part of the tertiary sector. Financial services, management consultancy, telephony and IT are good examples of service sector. Like the secondary sector it also provides value addition for a product.This sector is also known as service sector.

During early civilization all economic activity was in primary sector. When the food production became surplus people’s need for other products increased. This led to the development of secondary sector. The growth of secondary sector spread its influence during industrial revolution in nineteenth century.

After growth of economic activity a support system was the need to facilitate the industrial activity. Certain sectors like transport and finance play an important role in supporting the industrial activity. Moreover, more shops were needed to provide goods in people’s neighbourhood.

Ultimately, other services like tuition, administrative support developed.

To understand this interdependency, let us take an example of a cold drink.

A cold drink contains water, sugar and artificial flavor. Suppose if there is no

sugarcane production then procuring sugar will become difficult and costly

for the cold drink manufacturer. Now to transport sugarcane to sugar mills

and sugar to the cold drink plant needs the services of a transporter. A

person or system of persons is required to maintain and monitor all these

movements of goods from farm to factory to shop in different locations. That

is where role of administrative staffs comes. Let us go back to the farmer.

He also needs fertilizers and seeds which is processed in some

factory and which will be delivered to his doorstep by some means of

transportation. To top it all at every step of these activities we require the

proper monetary and banking system. So, in a nutshell this describes how

interrelated all sectors of an economy are.

Sugarcane growing

(primary sector)

Transporting of sugarcane

(tertiary sector)

Manufacturing of sugar and drink(secondary sector)

Final product

How do we count the various goods and

services and know the total production in

each sector?The values of goods and services is used rather than adding the actual number to know the total production. For example, if 10,000 kgs of wheat is sold at Rs. 8 per kg , the value of wheat be Rs. 80,000. The value of 5,000 coconuts at Rs.10 per coconut will be Rs. 50,000. Similarly, the value of goods and services in the three sectors are calculated and then added up. Remember, there is one precaution one has to take. Not every good that is produced and sold needs to be counted. It makes sense only to include the final goods and services. Take, for instance, a farmer who sells wheat to a flour mill for Rs.8 per Kg. The mill grinds the wheat and sells the flour to a biscuit company for Rs. 10 per kg. The company uses the flour and things such as sugar and oil to make four packets of biscuits. It sells biscuits to the consumers for Rs 60 (Rs 15 per packet).

•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 sum of production in three sectors gives GDP of the country.

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

•It shows how big the economy is.

The graph shows a massive increase in turnover for all these sectors during 20 years, which shows the way our economy grew.

The graph shows that share of agriculture decreased substantially and that of industry remained static and share of services grew. Particularly the growth of share of services sector was phenomenal from 35% to 55%.

The share in providing employment was not in tune with the share in GDP. The agriculture provided employment to 75% workers and this decreased to 60% in 2000, which is not as big a drop as agriculture’s drop in GDP contribution. On the other hand the growth in employment provided by other two sectors was substantially low.

1. Majority of people are still employed in agricultural activities. As agriculture provides seasonal employment during cropping season so chances of hidden employment are big. Moreover, as history suggests a developed nation’s dependency shifts from primary sector towards tertiary sector in all aspects of economic development, so it can be said that India is still way behind because majority still depend on agriculture.

2. Secondary and Tertiary Sector have failed to generate enough employment opportunities making a pressure on primary sector. Although educated and skilled workforce do get employed in secondary and tertiary sector but for unskilled and semi-skilled workers there is still shortage of employment avenues.

The sector which carries out all activity through a system and follows the law of the land is called organized sector. Moreover, labour rights are given due respect and wages are as per the norms of the country and those of the industry. Labour working organized sector get the benefit of social security net as framed by the Government. Certain benefits like provident fund, leave entitlement, medical benefits and insurance are provided to workers in the organized sector.

These security provisions are necessary to provide source of sustenance in case of disability or death of the main breadwinner of the family. Otherwise the dependents will face a bleak future.

The sector which evade most of the laws and don’t follow the system come under unorganized sector. Small shopkeepers, some small scale manufacturing units keep all their attention on profit making and ignore their workers basic rights.

Workers don’t get adequate salary and other benefits like leave, health benefits and insurance are beyond the imagination of people working in unorganized sectors. For example, people domestic helpers or worker at local grocery shop.

Companies which are run and financed by the Government comprise the public sector. After independence India was a very poor country. India needed huge amount of money to set up manufacturing plants for basic items like iron and steel, aluminum, fertilizers and cements. Additionally infrastructure like roads, railways, ports and airports also require huge investment. In those days Indian entrepreneur was not cash rich so government had to start creating big public sector enterprises like SAIL (Steel Authority of India Limited), ONGC(Oil & Natural Gas Commission).

The private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state .The private sector employs most of the workforce in some countries.The private sector is legally regulated by the state. Businesses within one country are required to comply with the laws in that country.

•It is a situation where people are apparently working but all of them are made to work less than their potential.

•If few people move out, it will not effect the production.

•It is hidden in contrast to the open unemployment where a person is clearly or visibly without job.

•For Example- there are thousands of casual workers in service sector in urban areas as painters, plumbers, etc.

•Each one is doing some work but no one is fully employed. This is the situation of underemployment, where people are apparently working but all of them are made to work less than their potential. This kind of underemployment is hidden in contrast to someone who does not have a job and is clearly visible as disguised unemployment.

•We see people of the service sector on the street pushing a cart or selling something where they may spend the whole day but earn very little. They are doing this work because they do not have better opportunities.

•There are lakhs of farmers in India and even if we remove a lot of people from agricultural sector and provide them with proper work elsewhere, agricultural production will not suffer.

•National Rural Employment Guarantee Act 2005 (NREGA 2005).

•It is started by central government

•Under NREGA 2005, all those who are able to, and are in need of, work 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 types of work that would in future help to increase the production from land will be given preference under the Act.