10 Economics Chapter 2 Sectors of Indian Economy

Chapter Notes and SummarySectors According to Economic Activities
1. Utilisation of natural resources depends upon man’s occupation, civilisation and his standard of living.
2. Human occupation is a good index to understand interaction between man and his environment.
3. Man adopts different occupations to fulfil his needs, these occupations can be divide into three sectors
(a) Primary Activity
(b) Secondary Activity
(c) Tertiary Activity
• tertiary activities help in development of primary and secondary sectors.
• These are also called support services because they do not produce goods or a product but they are an aid or a support for production process.
• Developed stage of agriculture increases purchasing power of farmers, and promotes secondary and tertiary activities.
• Chemical fertilizers are produced in secondary sector but are consumed in primary sector.
• Trade and transport establish a link between producer and consumer.
Comparing Three Sectors
1. performance of each sector adds only final goods and services produced by sector.
2. Value of intermediate goods should not be added in it.
(a) Intermediate Goods Intermediate goods are those goods which are within boundary line of production.
The value of these goods is not included in national income of a country.
Their value is reflected in value of final goods.
(b) Final Goods Final goods have crossed boundary line of production and are ready for use by final users.
• Air conditioners, refrigerators and cloth are examples of final goods.
• It avoids double counting (counting of value of product more than once).
Gross Domestic Product (GDP)
1. Gross Domestic Product includes market value of final goods and services produced by all such producers.
2. There are both resident as well as non-resident producers within domestic territory of a country.
3. In India, mammoth task of measuring GDP is undertaken by a central government ministry.
4. This department collects information relating to total volume of goods and services and their prices and then estimates GDP.
Growth of Various Sectors in World
1. New methods of manufacturing were introduced, factories came up and started expanding.
2. Secondary sector gradually became most important in total production and employment.
3. Over a period of time, a shift has been taken place and importance of sectors has changed.
4. In developed countries most of working people employed in service sector.
Primary, Secondary and Tertiary Sectors in India
1. Over thirty years between 1973 and 2003, while production in all three sectors has increased, it has increased most in tertiary sector.
Factors Responsible for Growth of Tertiary Sector
1. Basic Services basic services are required in several services like hospital, police station, courts,
villages, educational institutions, defence etc.
(a) In developing country, government has to take responsibility for provision of these services.
(b) As more people are being employed to provide basic servics to people, share of tertiary sector in GDP is increasing.
2. More Income More Services per capita income in our country is rising.
(a) As income level rises people demand more services like, tourism, shopping centres, professional training centres, schools and banks etc.
3. Development of Means of Transport and Communication development of agriculture and industry leads to development of services such as transport, trade and communication.
(a) All these are under tertiary sector.
4. New Services production of services like information and communication technology have become important and essential.
(a) There are very large number of workers engaged in services such as small shopkeepers, repair persons,
transport persons etc.
Where are Most of People Employed?
The primary sector employs more than 60% of population even after more than 50 years of independence.
There are many factors responsible for this, such as
1. secondary and tertiary sectors have failed to create enough jobs.
2. Even though industrial output or production of goods went up by eight times during period, employment in industry went up by only 2.5 times.
(a) production in service sector rose by 11 times,
employment in service sector rose less than three times.
3. More than half of workers in country are still working in primary sector, mainly in agriculture,
producing only a quarter of GDP.
(b) Workers in agricultural sector are under employed or disguised unemployed.
Disguised Unemployment
1. It is a situation in which more workers are working in an activity than required.
2. people who are actually engaged in such an activity appear to be employed but are not fully employed.
3. If for cultivation of one hectare land, 10 workers are required but instead of 10 workers, 15 workers are working, extra 5 workers are called disguised unemployment.
4. There are thousands of causal workers in service sector in urban areas who search for daily employment.
5. They are employed as painters, plumbers, repair persons and others doing odd jobs.
6. People who have not better opportunities may spend whole day but earn very little.
How to Create More Employment?
1. Diversification of Agriculture More than 60% of our workers are employed in agriculture.
(a) There is need to diversify agriculture.
(b) Farmers should be encouraged to adopt pisciculture,
horticulture, animal rearing etc along with cultivation of crops.
2. Cheap Credit Most of farmers depend on informal sources of credit i. e. , money lenders, relatives, traders etc who charge a very high rate of interest.
(a) Government should encourage commercial banks to provide loans to farmers at cheaper rates.
3. Promotion of Local Industries and Other Activities
(a) Identify, promote and locate industries especially cottage and small scale industries in semi-rural areas where a large number of people may be employed.
(b) Opening a cold storage can give an opportunity to farmers to store their products like potatoes and onions and sell them when price is good.
(c) It is also possible to set up industries that process vegetables and agricultural produce like. potato, sweet potato, rice, wheat, tomato, fruits which can be sold in outside markets.
4. Provision of Basic Facilities Our rural areas lack basic facilities like roads, transportation, banking, ware houses, markets etc.
(a) government should invest some money in these areas so that Indian villages can be linked to other markets.
(b) This can provide productive employment not to just farmers but also other such as those in services like transport or trade.
5. Improvement in Education and Health Facilities Most of Indian villages lack education and health facilities.
(a) Planning Commission estimated that nearly 20 lakh jobs can be created in education sector alone.
(b) If, we are to improve health situation, we need money more doctors, nurses, health workers etc to work in rural areas.
(c) There are some ways by which jobs would be created and we would also be able to address important aspects of development.
National Rural Employment Guarantee Scheme
(NREGA) scheme was launched by Prime Minister Manmohan Singh in 2006.
Main features of scheme are
1. seheme targets scheduled castes, scheduled tribes and poor women who suffer from poverty.
2. To provide livelihood to people below poverty line,
guarantees 100 days of wage employment in a year to every rural household in country.
3. gram panchayat after proper verification will register households and issue job cards to registered households.
(a) job card is legal document that entitles a person to ask for work under act and to get work within 15 days of demand for work, failing which unemployment allowance would be payable.
Division of Sector as Organised and Unorganised
1. Organised Sector Organised sector covers those enterprices or places of work where terms of employment are regular and therefore people have assured work.
They are registered by government and have to follow its rules and regulations which are given in various laws such as Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops and Establishments Act, etc.
(a) Workers in organised sector enjoy security of employment.
(b) They work only for a fixed number of hours.
(c) If they work more, they have to be paid overtime by employer.
(d) They get medical benefits and, under laws, factory manager has to ensure, facilities like drinking water and a safe working environment.
(e) workers working in organised sector also get pension after retirement.
(f) They get several benefits from employers like paid leave, payment during holidays, provident fund, gratuity etc.
2. Unorganised Sector Unorganised sector is a sector which is not registered by government.
The organised sector is characterised by small and scattered units which are largely outside control of government.
Here rules and regulations are not followed.
(a) Workers working in unorganised sector get less wages.
(b) There is no provision for overtime, paid leave,
holidays, leave due to sickness etc.
(c) A large number of people doing small jobs such as selling on street or doing repair work comes under unorganised sector.
(d) Employment is subject to high degree of insecurity people can be asked to leave without any reason.
(e) Landless and causal workers also come under unorganised sector.
Vulnerable People Who Need Protection
1. unorganisd sector comprises mainly of workers in small-scale industry, causal workers in construction, trade and transport etc and those who work as street vendors,
head load workers, garment makers, rag pickers, etc.
2. Majority of workers from scheduled castes, tribes and backward communities find themselves in unorganised sector.
Besides getting irregular and low paid work these workers also face social discrimination. Protection and support to unorganised sector workers is thus necessary for economic development of country.
How to Protect Workers in Unorganised Sector?
1. Alternative Sources of Employment This is perhaps best policy, on long term basis, to create ample opportunities of employment, in areas other than agriculture.
(a) development and growth of other sectors of economy is very essential to create additional employment opportunities in other sectors like electric power, finance and training of rural workers.
2. Public Works Programmes There is a need to organise public works programmes like construction of roads school buildings, digging of irrigation canals, etc with a view to providing employment to rural workers throughout year.
(a) These public works programmes are only short-term measures.
3. Social Security workers of unorganised sector have no social security of job.
(a) There is no provision of sick leave, earned leave,
pension or gratuity etc.
(b) Sincere efforts are needed, because agricultural labour is not permanently attached to any particular employer for want of which social security becomes a complex problem.
(c) state must shoulder responsibility of providing compulsory insurance either on marginal contribution or an average contribution.
Sector in Terms of Ownership
1. Public Sector
2. Private Sector
(a) Both sectors are involved in major activities of economy and there are no watertight compartments as to what should be sphere of which sector. But still difference exists.
(b) public sector units usually predominate in certain specific sectors, e.g., mining, power generation, transport,
health, education etc.
(c) These sectors belong to core industries and infrastructure activities.
(d) private sector predominates in agricultural and allied manufacturing industries, construction, trade and hotels etc.
(e) Both sectors are seen simultaneously in same sphere of economic activity, even though extent of mixing may vary from activity to activity.
Motivation private sector activities are centred around profit motives, and concept of service is of secondary consideration.
The public sector activities are determined by social welfare considerations with motive of providing basic needs of people of country and profit motives are secondary considerations.
Hindustan Lever, Bajaj Autos, Tata lron and Steel Company are some examples of private sector.
Sindhri Fertilizer Limited Bharat Heavy Electricals Limited,
Indian Railways are some examples of Public Sector Units
Role of Government or Public Sector
1. Development of Infrastructure It comprises development of transport, power, basic industries,
communication etc.
(a) Expenditure on development of infrastructure is known as social overhead costs.
(b) development requires huge capital investment,
which cannot be mobilised by private sector.
(c) Pace of industrial development cannot be accelerated without their establishment.
(d) These projects do not promise high profits.
(e) private entrepreneurs would therefore be reluctant to undertake them.
2. Development of Backward Areas If industries are setup in backward areas then goal of achieving a reduction in economic inequality between regions becomes easy to reach.
(a) profit seeking private industrialists often are not enthusiastic enough to set up industry in backward regions.
(b) government, finds it necessary to start industrial production in these areas on its own.
3. Basic Facilities There are a large number of activities which are primary responsibilities of government.
(a) Providing health and education facilities for all is one example.
(b) Running profer schools and providing quality education particularly elementary education is duty of government.
(c) India’s size of illiterate population is one of largest in world.
4. Other Problems There are many other problem like malnourishment, high infant mortality rate, unsafe drinking water, lack of housing facilities etc, which need special attention.
(a) These problems can be solved only with help of government.

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