Chapter 2. Sectors of Indian Economy

Different Sectors
• When we produce a good by exploiting natural resources, it is an activity of primary sector.
• This is because it forms basis for all other products that we subsequently make. Since, most of natural products we get, are from agriculture, dairy, fishing, & forestry, this sector is known as ‘agriculture and related sector’.
• The secondary sector covers activities in which natural products are changed into other forms through ways of manufacturing that we associate with industrial activity. It is next step after primary. The product is not produced by nature but has to be made, and therefore some process of manufacturing is essential.
• This sector gradually became associated with different kinds of industries that came up; it is known as industrial sector.
• After primary and secondary, there is a third category of activities that falls under tertiary sector and is different from above two. These are activities that help in development of primary and secondary sectors.
• These activities, by themselves, do not produce goods, but they are an aid or support for production process. Since these activities generate services rather than goods, tertiary sector is known as service sector.
• The value of final goods and services produced in each sector during a particular year provides total production of sector for that year. And sum of production in three sectors gives what is known as Gross Domestic Product (GDP) of a country. It is value of all final goods and services produced within a country during a particular year. GDP shows how big economy is.
• For instance, a farmer who sells wheat to a flour mill for ` 8 per kg. The mill grinds wheat and sells flour to a biscuit company for ` 10 per kg. The biscuit company uses flour and things such as sugar and oil to make four packets of biscuits. It sells biscuits in market to consumers for ` 60 (` 15 per packet). Biscuits are final goods, i.e., goods that reach consumers.
• We only take final goods and services into account while calculating GDP, not intermediate.
• In India, task of measuring GDP is undertaken by a Central Government Ministry. This Ministry, with help of various governments of all Indian states and union territories, collects information relating to total volume of goods and services and their prices and then estimates GDP.

Tertiary Sector
• Over forty years between 1973-74 and 2013-14, while production in all three sectors has increased, it has increased most in tertiary sector.
• As a result, in year 2013-14, tertiary sector emerged as largest producing sector in India, replacing primary sector. There are several reasons for this.
• First, in any country, several services such as hospitals, educational institutions, post & 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.
• Second, development of agriculture and industry led to development of services such as transport, trade, storage, & like, as we have already seen. The greater development of primary and secondary sectors, greater demand for such services.
• Third, as income levels rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, professional training, etc.

• More than half of workers in country are working in primary sector, mainly in agriculture, producing only about one-sixth of GDP. In contrast to this, secondary & tertiary sectors produce rest of product, whereas they employ less than half people.
• Even if we move a few people out, production will not be affected. In other words, workers in agricultural sector are underemployed.
• This is 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 visible as unemployed. Hence, it is known as disguised unemployment.
• This underemployment can happen in other sectors. For example, there are thousands of casual workers in service sector in urban areas who search for daily employment. They are employed as painters, plumbers, repair persons, and others doing odd jobs.
• Every state or region has potential for increasing income and employment of people in that area. It could be tourism, regional craft industry, or new services like IT. Some of these would require proper planning and support from government. For example, study by Planning Commission says that if tourism as a sector is improved, every year we can give additional employment to more than 35 lakh people.
• A study conducted by erstwhile Planning Commission (now called NITI Aayog) estimates that nearly 20 lakh jobs can be created in education sector alone. These are some ways by which jobs would be created.
• The Central Government in India made a law implementing ‘Right to Work’ in about 625 districts of India. It is known as Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA 2005).
• Under MGNREGA 2005, all those who can, and need work in rural areas are guaranteed 100 days of employment in a year by government. If government fails in its duty to provide employment, it will give unemployment allowances to people.

Organised and Unorganised Sectors
• The organised sector covers those enterprises or places of work where terms of employment are regular and, therefore, people have assurance of 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 & Establishments Act, etc.
• It is known as organised because it has some formal processes and procedures.
• Workers in organised sector enjoy security of employment. They are expected to work only a fixed number of hours. If they work more, they have to be paid overtime by employer. They get several other benefits from their employers.
• The unorganised sector is characterised by small and scattered units which are largely outside control of government. There are rules and regulations, but these are not followed. Jobs here are lowpaid and often irregular. There is no provision for overtime, paid leave, holidays, leave due to sickness, etc. Employment is not secure. People can be asked to leave without any reason.
• This sector includes a large number of people who are employed on their own doing small jobs such as selling on street or doing repair work.
• In rural areas, unorganised sector mostly comprises landless agricultural labourers, small & marginal farmers, sharecroppers, and artisans (such as weavers, blacksmiths, carpenters, and goldsmiths). Nearly 80 percent of rural households in India are in small and marginal farmer category.
• In urban areas, unorganised sector comprises mainly workers in small-scale industry, casual workers in construction, trade, transport, etc., & those who work as street vendors, head load workers, garment makers, rag pickers, etc.
• The casual workers in both rural and urban areas need to be protected. Besides getting irregular and low-paid work, these workers face social discrimination. Protection and support to unorganised sector workers are necessary for both economic and social development.

Public and Private Sectors
• In public sector, government owns most of assets and provides all services.
• In private sector, ownership of assets and delivery of services is in hands of private individuals or companies.
• Railways or post office is an example of public sector, whereas companies like Tata Iron and Steel Company Limited (TISCO) or Reliance Industries Limited (RIL) are privately owned.
• Activities in private sector are guided by motive to earn profits, whereas purpose of public sector is not just to earn profits.
• There are a large number of activities that are primary responsibility of government. The government must spend on these. Providing health and education facilities for all is one example.

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