CLASS NOTES
CLASS : X
SUBJECT : ECONOMICS
TOPIC :SECTOR OF INDIAN ECONOMY
MONTH
TEACHER’S NAME:
MRS. ASHIMA SHARMA
: JULY, 2012
Sectors of the Indian Economy
Economic activities are activities that result in the production of goods and services.
Sectors are group of economic activities classified on the basis of some criteria.
Three types of classification are:
1. Classification of economics activities on the basis of nature of activity
•
Primary Sector
•
Secondary sector
•
Tertiary sector
2. Classification of economics activities on the basis of conditions of work
•
Organised sector
•
Unorganised sector
3. Classification of economic activities on the basis of ownership of assets
•
Public sector (government’s control)
•
Private sector (controlled by individual or group of individuals)
DIFFERENCES BETWEEN PRIMARY SECONDARY AND TERTIARY SECTORS
Primary Sector
Secondary Sector
Tertiary Sector
1.
It
includes
those 1. It includes those
1. it includes those activities
activities which lead to the activities which result in
that in the development of
the primary & secondary
production of goods by transformation of natural
exploitation
of
natural products into other forms by sectors by supporting the
resources.
manufacturing.
production process.
2. It produces natural
2. It produces
2. It does not produce
products like cotton, milk,
manufactured goods like
goods but generates
fruits, wheat, fish, subber
cloth, sugar, bricks etc.
services like transportation,
etc.
communication, basting etc.
3. It also called agriculture
3. It is also called the
3. It is also called the
and related sector because industrial sector as this
service sector as this sector
most of the natural products sector has come to be
generates services rather
obtained are from
associated with different
than goods.
agriculture, diary, fishing,
kinds of industries.
forestry etc.
4. Examples of primary
4. Examples of secondary
Examples of tertiary sector
sector activities are
sector activities are
activities are banking,
agriculture, fishing, mining, manufacturing and
insurance, finance etc.
animal husbandry etc.
construction.
CLASS NOTES
Interdependence of the primary, secondary & tertiary sectors
Why the primary sector is called so?
This is because it forms the base for all other products that we subsequently make.
Why the secondary sector is called so?
This is because it is the second step after primary. It includes activities in which natural product are
changed into other forms through manufacturing that is associated with industrial activity.
Does the tertiary sector include only these services that help in the production of goods?
No. The Tertiary sector also includes some essential services that may not help directly in the
production of goods. It includes some personal service providers like washer men, barbers,
cobblers, maids etc. & teachers, doctors etc. This sector also includes certain new services based
on information technology like cyber cafes, ATM booths, call centers, software companies.
Comparing the three sectors
Each of the three sectors (primary, secondary & tertiary) produces a large number of goods and
services. To know the total production in any one of the three sectors, we need to count the goods
and services that are produced. This counting of goods and services involves two problems:
a) There are too many goods and services produced. So, counting them could be a difficult
task.
b) We cannot add cars furniture, computers etc. together to arrive at a total figure.
The first problem makes the process of counting a bit difficult. But its not impossible to count all the
goods and services produced. The second problem can be overcome by adding the values of goods
and services produced rather than the actual numbers.
Value = price × quantity
E.g. if 10,000kgs of wheat is sold at Rs 8 per kg, then value of wheat will be Rs. 80,000
CLASS NOTES
Precaution to be taken while estimating total production
Not all goods and services that are produced and sold need to be counted.
We count only final goods and services and not intermediate goods. This is because intermediate
goods (e.g. cotton, sugar, flour etc) are used up in the production of final goods and services (e.g.
cloth, biscuits etc) Thus, the value of final goods and services already includes the value of
intermediate goods. If we include the value of intermediate goods separately, it will lead to double
counting.
Consider the example below,
a farmer sells wheat to a flour mill for Rs 8/kg. the mill grids it and sells the flour at Rs 10/kg to a
biscuit company. The biscuit company uses the flour along with sugar, oil etc. to make 4 packets of
biscuits and sells it to consumers for Rs 60 (@ Rs 15/packet)
The biscuits are the final goods here and their value (Rs 60) already includes the value of
intermediate goods like flour etc. thus if we count the value of flour again we will be counting the
value of the same thing a number of times. First as wheat then flour and finally biscuits.
Intermediate goods are those which are used up in the production process to make final goods &
services. e.g. Wheat flower is used in the production of a packet of biscuit.
Final goods & services are those which reach the consumers for final consumption or capital
formation.
Double Counting: - The counting of the value of a product more than once is called double
counting. This leads to the over estimation of the value of goods and services produced.
GDP (Gross Domestic Product)
GDP – is the market value of all final goods and services produced within a county during a year. It
shows how big the economy is.
Step involved in the estimation of GDP
1. Estimate the total production for each of the sectors of the economy: Total production
of any sector is the value of all final good & services produced in that sector during a year.
2. Find the sum of total production in each of the sector.
We add the total production of the primary, secondary and tertiary sector to arrive at GDP.
CLASS NOTES
Estimation of GDP in India
GDP in India is measured by central government ministry with the help of various government of
states and Union Territories. It collects information about the total volume (number) of goods &
services and their price and then estimates GDP.
Historical Changes in Sectors
What does the history of developed countries indicate about the shifts that have taken place
between sectors?
The history of developed countries indicates about the shifts that have taken place between sectors
as given below:
(i) In the initial stages, the primary sector was the most important sector. Most of the people were
employed in the sector i.e., agricultural sector.
(ii) With the changes in the method of farming, the production increased tremendously. Now
people could do other activities such as trading etc. they, therefore, became craft persons and
traders. Increase in production of grains and other things led to the growing need for
transportation and other facilities. But inspite of this at this stage most of the goods produced
were natural products from the primary sector and most people were also employed in this
sector.
(iii) With the passage of time, machines were invented. Factories were established to manufacture
various goods. Gradually, the industries were established and industrial sector employed more
and more people. As a result of these changes, the secondary sector became most important in
total production and employment. Thus, the importance of the sectors had changed.
(iv) In the past 100 years, there has been a further shift from secondary to tertiary sector in
developed counties. This sector is also called service sector because it provides basic services
such as teachers, doctors, lawyers, internet café, ATM booths. Tertiary sector and became
most important in terms of production. At present, it employs the maximum number of people.
So there has been a shift from primary sector to secondary sector and then to tertiary sector or
service sector in the development countries.
CLASS NOTES
Rising importance of the tertiary sector in production
The cause for tertiary sector becoming important sector in India by replacing the primary sector are
as follows:
(i) Concept of welfare state and basic services: In modern welfare state such as India, the
government is supposed to provide basic services such as hospitals, educational institutions,
defense, posts and telegraphs for welfare of the people. These functions have led to the
importance of the tertiary sector.
(ii) Development of agriculture and industry: With the introduction of new agricultural tools, the
production increased. At the same time invention of machines led to the development of
industrial sector such as transport, banking etc. Thus, development in primary and secondary
sectors led to the importance of tertiary sector.
(iii) Rise in income: As the income of the people rose, there was more need for services such as,
public schools, shops, private hospitals etc, for better facilities.
(iv) Development of information technology: The development of information and
communication technology has increased the importance of tertiary sector because now most
of the people want to avail these services such as mobile phone, internet café etc. more and
more people are entering these services.
Service sector in India employs two different kinds of people. Who are these?
Service sector in India employs two different kinds of people as mentioned below:
(i) There are highly skilled & educated workers such as teachers and doctors.
(ii) On the other hand, a large number of workers are engaged in services such as small
shopkeepers, repair persons etc. who barely manage to earn a living. They perform these
services because they do not have any other work to do. As a result of this only a portion of
service sector is growing in importance.
Status of Employment in India.
(i) The distribution of work force has improved but even today 60% of the work force finds
employment in primary sector.
(ii)
Primary Secondary Tertiary
60%
11%
24%
Work force
Primary Secondary Tertiary
23%
26%
51%
Contribution to GDP
A remarkable features about employment’s situation in India is that there has been a shift
directly from primary sector to tertiary sector in India.
There is a strange (paradoxical) situation Though, agriculture contributes less than 1/4th to the
national income, it employs more than ½ (half) to the work force. This is because there are not
CLASS NOTES
enough jobs in secondary and tertiary sectors. (A study of same trends will being out that
despite development, not enough job, have been created. The trend in the production &
employment has been
Trends in last 30 years
Production
Employment
Industries
8 Times
2.5 times
Tertiary
11 times
> 3 times
Agricultures
1/4th
60%
SEF
3/4th
40%
(3)
We find that there in a lot of under employment in our country. Under – employment means
that a person in willing to work 8 hrs in a day but gets an employment for only 1 – 2 hours or is
then 8 hrs. Disguised unemployment is very common in the agriculture sector. For example: - if
5 people, are working on a piece of land, 3 are moved out, yet output remain the same. This
means that these 3 people were suffering from disguised unemployment in urban Indian also,
and other sectors there are many such people like painters, plumbers, repair person they may
spend the whole day but earn very little.
Why the primary sector in India continues to be the largest employer in 1973 as well as in
2000?
There was change in the share of GDP of the three sectors but the primary sector continues to be
the largest employer in 1973 as well as in 2000 because enough jobs were not created in the
secondary and tertiary sectors. Industrial output or production of goods increased by eight time i.e.,
from 6000 crore to 50,000 crore approximately but the employment increased 2.5 times only,
similarly in tertiary sector, the production increased 11 times i.e., from 10,000 crore to 110,000 crore
but employment increased only less than three times. Thus, the primary sector still employed about
63% people in the country as shown in the graphs given above.
From above, it is clear that there has been a change in the share of three sectors in GDP. The
share of the tertiary sector has increased and of primary sector decreased. The share of the
secondary sector remained constant.
But a similar change has not taken place in employment. The tertiary sector and secondary
sector still lags behind the primary sector which continues to employ almost 62% workers in the
year 2000. Thus, secondary and tertiary sectors produce 75% of the produce but employ less than
half the people. Comparatively, it can be stated that the share of the tertiary sector in GDP has
increased but it employs less percentage of people.
DISGUISED UNEMPLOYMENT
Disguised unemployment is a situation in which more people are engaged in an activity than the
required ones. The people who are actually engaged in such an activity appear to be employed but
are not fully employed. In such cases, even if the surplus labourers are removed from the work,
production does not suffer. In India, the problem of disguised unemployment is particularly acute in
rural areas where more persons do the work in the fields. Thus, more people do the same work than
is necessary. In other words, workers in agricultural sector are under-employed. In such situation,
everyone does work. No one remain idle but in actual fact, their labour effort gets divided. They
work less than their potential.
CLASS NOTES
This kind of employment is hidden in contrast to someone who does not have a job and is
clearly visible as unemployed. Hence, it is known as disguised unemployment too.
In unban areas there are casual workers in the services sector who work for daily employment such
as painters, plumbers, repair persons and other doing odd jobs. They may spend the whole day but
earn very little. Thus, there is disguised unemployment both in rural and urban areas.
HOW TO CREATE MORE EMPLOYMENT
The following steps can be taken to remove disguised unemployment in the agriculture.
(i)
Loans should be provided to small farmers by the government or bank to have more irrigation
facilities like wells and tube-wells in order to enable them to grow second crop.
(ii)
New dams and canals should be constructed. This will lead to more employment in the
agricultural sector.
(iii) Transportation and storage facilities must be improved to provide productive employment to
not only the farmers but also others in services like transport and trade.
(iv) Banks should provide agricultural credit to the farmers for farming to improve.
(v) Industries such as dal mill, cold storage, honey collection centres, processing of vegetables
should be set up in rural or semi-rural areas. Such industries will get raw materials from the
rural areas and will create more employment opportunities for the rural people.
(vi) School should be opened in rural areas. This will provide jobs to about 20 lakh people in the
educational sector.
(vii) Health services should be improved by opening dispensaries and hospitals. This will create
jobs for doctors, nurses and other staff.
(viii) Tourism, regional craft industry or Information Technology should be encouraged by the
government to create more employment opportunities.
(ix) As a short term measure, the government has implemented the Right to Work in 200 district
of India. It is called National Rural Employment Guarantee Act 2005 (NREGA 2005)
National Rural Employment Guarantee Scheme (NREGA)
The scheme was launched by Prime Minister Manmohan Singh in 2006. Main features of the
scheme are:
1. The scheme targets Scheduled Castes, Scheduled Tribes and poor women who suffer from
poverty.
2. To provide livelihood to the people below the poverty line, guarantees 100 days of wage
employment in a year to every rural household in the country.
ORGANISED &UNORGANISED SECTOR
I.
Organized Sector: Organized sector covers those enterprises or places of work where the
terms of employment are regular and therefore people have assured work. They are registered
by the government and have to follow its rules and regulations which are given in various laws
such as the Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops &
Establishments Act etc. it is called organized because it has some formal processes and
procedures. Some of these people may not be employed by anyone but may work on their own
but they too have to register themselves with the government and follow the rules and
regulations.
CLASS NOTES
Advantages of organized sector for the workers:
1. Workers in the organized sector enjoy security of employment.
2. They work only a fixed number of hours. If they work more, they have to be paid overtime by
the employer.
3. They also get several other benefits from the employers like paid leave, payment during
holidays, provident fund, gratuity pension etc.
4. They also get medical benefits and, under the laws, the factory manager has to ensure
facilities like drinking water and a safe working environment.
II.
Unorganised Sector: Urorganised sector is a sector which is not registered by the
government. The unorganized sector is characterized by small and scattered units which are
largely outside the control of the government. There are rules and regulations but these are not
followed.
Disadvantages of unorganized sectors:
1. Workers working in unorganized sector get less wages.
2. There is no provision for overtime, paid leave, holiday, leave due to sickness etc.
3. Employment is subject to high degree of insecurity. People can be asked to leave without
any reason.
How to protect workers in unorganized sector?
As the workers in the unorganized sector are low-paid, not regular and are exploited in different
ways, there is a need for their protection. The following steps should be taken to provide protection
and support to them:
(i) Generally, the vulnerable people in the unorganized sector are landless agricultural
labourers, small and marginal farmers, carpenters etc. who should be given support by the
government. For example, small farmers who comprise 80% of the rural households, should
be supported in procuring seeds, agricultural inputs, credit, storage facilities and marketing
outlets.
(ii) In urban areas, government should help small scale industry in procuring raw material and
marketing of goods.
(iii) The interests of the casual workers in rural as well as urban areas must be protected by law.
(iv) As majority of the workers are generally from low castes, they are also socially discriminated.
The government should take steps to ensure equal treatment for all.
(v) Minimum Wages Act should be passed and enforced strictly.
(vi) The government should take steps to ensure regulation of working hours and grant of
medical facilities etc.
(vii) The government should take strict action against those employers who discriminate on
account of caste, creed and gender.
CLASS NOTES
Differentiate between public sector and private sector.
Public Sector
Private Sector
(1) In the Public Sector the govt. own (1) In the private sector, ownership of
most of the assets and provides all the
asset’s delivery of services is in the
services.
hands of private individuals or
companies
(2) The motive in the welfare of the people (2) The main motive in private sector is
through provision of basic services.
profit motive. They only invest in
those areas when profit margin is
(3) Provides those services which they feel
maximum.
are necessary for people of the region. (3) Only provides those goods & services
Ex. Railway, post office.
which yield quick return.
Ex. Reliance India. Limited. Tata Iron
& Steel company.
Role of Government in Public Sector
Or
Why do modern day governments spend on a whole range of activities?
(i)
Welfare of the people: The modern state is a welfare state that looks after the interests
of its citizens. The government is elected by the people. It is responsible to the people in
a democracy. People pay different types of taxes and expect their representatives or the
government to follow policies for the welfare of the people. So, generally those activities
which do not generate profit and are not taken up by the private sector, are taken up by
the government or public sector. The government collects taxes and can raise money to
implement various projects or to provide useful services to the people. Thus. Services
like Railway or Posts and Telegraphs are run by the government for the welfare of the
people. Such activities are also beyond the capacity of the private sector without
support.
(ii)
Large expenditure: Some activities like construction of roads etc. need large sum of
expenditure that cannot be borne by the private sector. So, the government takes up
such activities in the interest of the people in a democracy.
(iii) Some activities that need support of the government: There are some activities that
need support of the government in the form of subsidy such as provision of food grains
for the poor through ration shops. The government buys wheat, paddy etc. at a higher
price but sells at a lower price at ‘ration shops’. Such activities cannot be taken without
support from the government. Similarly, the government bears the cost of providing
cheap electricity to small scale industries as. Otherwise they may not be able to afford it
& may shut down.
(iv)
Duty of the government: it is duty of the government to raise the standard of living of
the people. It should make arrangements for quality education and health services in
order to take care of the poorest and most ignored regions of the country through
increase in expenditure in such areas. Thus, the government takes up various activities
and spends a lot of expenditure on them.