sectors of the indian economy

7/27/2019 Sectors of the Indian Economy

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SECTORS OF THE INDIAN ECONOMY

In order to understand the functioning of any economy, we need to study various sectors that it comprise. All around us we find peopl

engaged in different types of activites.

CLASSIFICATION OF THE ECONOMIC SECTORS:

The classifications are based on

1.Nature of activity being performed. — Primary, Secondary & Tertiary

2.Working conditions of the workers — Organised & unorganized.

3.Who own the assets/ on the ownership basis. — Public & Private

Q. Mention the 3 different classifications on the basis of which we divide the sectors Indian economy.

Ans.:

Primary, Secondary & Tertiary sector

Private & Public sector

Organized & unorganized sector

Which are the three sectors of economy?

Primary

Secondary

Tertiary

Q. Classify industries on the basis of their economic activities with examples.

PRIMARY SECTOR : ( What do you mean by the PRIMARY SECTOR?)

This sector consists of activities that are undertaken by directly using the natural resources.

This sector is called primary as it forms the base for all other products to be subsequently produced.

Example : the cultivation of cotton. It takes place within a crop season. For the growth of the cotton plant,

depend mainly, but not entirely, on natural factors like rainfall, sunshine and climate. The product of this activ

cotton, is a natural product.

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

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

sector.

1. Why is the primary sector also called as agriculture and related sector?

Primary sector also called as agriculture and related sector because most of the natural products we get are from agricultur

dairy, fishing, forestry etc.

2. Why is primary sector called so ?

This is because it forms the base for all other products that we subsequently make.

SECONDARY SECTOR : (What do you mean by the SECONDARY SECTOR?)

Define secondary sector:

Secondary sector is the sector in which people are engaged in activities in which natural products are changed into

other forms through ways of manufacturing that we associate with industrial activity. It is the 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 could be in a factory, a workshop or at home. For example, using cotton fibre from the plant, we spin yarn and

weave cloth

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.

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

3. Why secondary sector also called as industrial sector?

Since the secondary sector gradually became associated with the different kinds of industries that came up, it is also called

as industrial sector.



TERTIARY SECTOR : (What do you mean by the TERTIARY SECTOR?)

This sector consists of activities that do not produce goods but they are an aid in the production process.

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

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 train

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);

d) Banking--borrowing money from the banks to help production & trade..

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

4. Why Tertiary sector also called as service sector?

The activities of the tertiary sector generate services rather than goods; therefore this sector is also called the service

sector. Service sector also includes some essential services that may not directly help in the production of goods.

5. Why are only „final goods and services‟ counted while computing the total production ?

Or

Why are only „final goods & services‟ counted in the GDP? Explain with the help of an example.

Ans. This is because the value of final goods already includes the value of all intermediate goods that are used in making the final gooFor example, a farmer sells wheat to a flour mill for Rs 8 per Kg. The flour mill grinds the wheat & sells the flour to a biscuit comp

for Rs 10 per Kg. The biscuits company in turn uses flour & other things to make biscuit & sells it in the market for Rs 60. Here,

value of Rs 60 for biscuit (final good) already includes the value of flour (Rs 10).

6. What do you understand by GDP of a country ? (or How do we calculate the GDP of a country?)

Ans.: GDP — The value of final goods and services produced in each sector during a particular year provides the total production of t

sector for that year. And sum of production in three sectors give Gross Domestic Production — GDP of the country .

GDP is the Gross Domes c Product which is calculated by having the sum of production in the 3 sectors.

GDP is the value of all final goods & services produced within a country during a particular year.

GDP shows how big the economy is.

7. Who measures the GDP in India? (or Who undertakes the task of estimating GDP in India ?)

This mammoth(huge) task in India is carried on by the Central government ministry , with the help of various govt. Departments of

Indian states and union territories. The information relating to total volume of goods and services and their prices is collected and then

estimates the GDP.

8. How do we count the various goods and services and know the total production in each sector?

As thousands of goods and services are produced, it is an enormous task to add up all these.

To get to this problem economists suggested that the value of goods and services should be used rather than adding the actua

numbers.

But only one precaution is to be undertaken ie., only final value of the goods and services should be counted as it already

includes the value of all intermediate goods.

Q9 “More than half of the workers in the country are working in the primary sector, mainly in agriculture, produce on

quarter of GDP.” Does this statement mean that the workers in agriculture are not producing as much as they could? G

reasons.

Ans.: It is not that the workers in agriculture are not producing as much as they could but the real problem is that there are more peo

in agriculture than is necessary. So, even if a few people are pulled out from here, production will not be affected. Thus, worker

agriculture sector are said to be underemployed. Also, the rate at which these primary products are sold in the market is less becaus

which their contribution to the GDP is also less.

10.Describe the general pattern of change seen in various sectors of economy in most of the developed countries.

Or

Q. What changes have been bought about in the primary, secondary & tertiary sectors over a period of me?



Ans.: Historical change in the sectors: three stages.

INITIAL STAGE: PRIMARY SECTOR -

a) Noted from the histories of many (now developed) countries, primary sector was the most important sector of econo

activity at initial stages of development.

b) As the methods of farming changed & agricultural sector began to prosper, it produced much more food than before.

c) Many people could now take up other activities which led to the increase in number of activities. Buying & selling activ

increased many times.

d) However, at this stage most of the goods produced were natural products from primary sector & most people were a

employed in this sector.

SECOND STAGE: SECONDARY SECTOR -

a) Over a long time (more than hundred years), & specially because new methods of manufacturing were introduced, facto

came up & started expanding.b) Those people who had earlier worked on farms now began to work in factories in large numbers. People began to use m

more goods that were produced in factories at cheaper rates.

c) This sector gradually became important in the total production & employment.

d) Hence, over time, a shift had taken place. This means that the importance of sectors had changed.

THIRD STAGE: TERTIARY SECTOR -

a) In the past 100 years, there has been a further shift from secondary to tertiary sector in developed countries.

b) The service sector has become very important in terms of the total production.

c) Most of the working people are also employed in the service sector. This is the general pattern observed in develo

countries.

11. What does the history of developed countries indicate about the shifts that have taken place between sectors?(book questi

Ans. It indicates that both secondary and tertiary sectors are developing and are becoming major contributors of the GDP.

This shift has come up with the improvement in the agricultural sector, people now had more time for other activities and the

number of craft persons, traders (SECONDARY) increased and also buying and selling activities also increased .Now there w

many transporters, administrators, army etc.(TERTIARY)

Rising importance of terti ary sector in production :

Over thiry years between 1973 and 2003, production in the tertiary sector has increased the most, and it has emerged as the largest

producing sector in India replacing the primary sector.

12. Why the Tertiary sector is becoming so important in India?

Or

Give reasons for the Rising Importance of the Tertiary Sector in Production.

Or

Q“Tertiary sector has emerged as the largest producing sector in India replacing the primary sector”. Explain why is

tertiary sector becoming so important in India?

There are several reasons to it:

1. In any country several services such as hospitals , educational institutions, post and telegragh services, police stations, cou

village administrative offices, municipal corporations, defence, transport, banks, insurance companies etc. are required. Thes

services are called the ‟ Basic services.’ In the developing countries the government has to take the responsibility for provisi

of these services.

2. The development of the agriculture and industrial leads to the development of services such as transport, trade, storage and

the like. Greater the development of primary and secondary sectors more will be demand of such services.

3. As the income level rise, certain sections of people start demanding many more services like eating out, tourism, shopping

private hospitals, professional training etc. This is found especially in the big cities.

4. Over the past decade or so certain new services such as those based on the information and communication technology ha

become important & essential. The production of these services has been rising rapidly.

INDIAN SECTORIAL GROWTH:

It is a remarkable fact that while there has been a change in the share of three sectors in GDP, a similar shift has not taken place in

employment.

Service sector in India employs many different kinds of people — at one end there are a limited number of services that empl

highly skilled workers and on the other end there are a very large number of workers engaged in services such as small

shopkeepers, repair persons, transporters etc. Hence only a part of sector is growing in importance.



More than half of the workers in the country are working in primary sector, mainly in the agricultural, producing only a quar

of GDP. In contrast to this secondary and tertiary sector are producing three-fourth of the produce whereas they employ less

than half the people.

13. WHERE ARE MOST OF THE PEOPLE EMPLOYED? WHY?

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.

14. Even though primary sector employs largest number of people yet its share in GDP is less. Why?

More than half of the workers in the country are working in primary sector, mainly in the agricultural, producing only a quar

of GDP. In contrast to this secondary and tertiary sector are producing three-fourth of the produce whereas they employ less

than half the people.

This also means that there are in agriculture more people than necessary and even if we move a few people out, production w

not be effected. In other words, workers in the agricultural sector are under-employed.

UNDER-EMPLOYMENT:

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.

it is also called disused unemployment.

this underemployment also happens in the other sectors for example there are thousands of casual workers in service sector i

the urban areas as painters, plumbers, repair persons etc.

15.HOW CAN WE CREATE EMPLOYMENT?

There are various ways in which govt. can create employment opportunities as…

The govt. can spend some money or banks can provide loans to construct well ect. Which will reduce the dependency

farmers on rains, and they will be able to grow two crops a year.

Construction of Dams and Canals can lead to lot of generation of employment in agricultural sector itself.

If govt. invests some money on transportation and storage of crops or makes better rural roads, it can provide

productive employment not just to farmers but alsoto other who are in services like transport or trade.

If local banks give credits at reasonable rates to the small and marginal farmers ,they will be able to buy necessary

inputs for their crops in time.

Another way to solve this problem is to identify , promote and locate industries and services in the semi-rural areas

where a large number of people maybe employed.Example:many farmers grow arhar &chickpea for them a dall-mil

procure and process these & sell in the cities;opening a cold storage will give an opportunity to thefarmers to store th

produce like potato &onion and sell them price is good; villagers near forests can start with honey collectionect.

To improve health situation we need health centres, hospitals & for that doctors, nurses, workers.

Similarly to provide education to all children we would need lot of schools which can also generate employment.

Tourism:every state or region has the potential for increasing the income and employment for people in that area.Th

can also be done by promoting tourism or regional craft industry.

News services like IT are also creating jobs.

All these are the long term projects but govt also has certain short term projects for people as:NREGA-2005.

NREGA — 2005

National Rural Employment Guarantee Act 2005.

started by the Central govt.

made a law implementing Right to work in 200 districts of India.

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

give unemployment allowances to them

the work will of the type which will in future help to increase the production from land.

16 “Not the en re service sector is growing equally well.” Do you agree with this statement? Give reason(s) for your answer.



Ans.: Yes, not the en re service sector is growing equally well. This is because the service sector in India employs different kind

people. At the one end, there are a limited number of services that employ highly skilled & educated workers. At the other end, there

a very large number of workers engaged in services like small shopkeepers, repair persons, transport persons etc these people ba

manage to earn a living & yet they perform these services as no alternative work is available to them. Hence, only a part of this sec

is growing in importance.

17.Why is the problem of underemployment hidden in nature?

Ans.: The problem of underemployment is hidden in nature as people are apparently working but all of them are made to work less t

their potential or some people are even made to work more but are not paid accordingly & are thereby exploited. This is in contras

someone who does not have a job & is clearly visible as unemployed.

18. Does the problem of underemployment happen in others sectors also, apart from agriculture?

Substantiate with example(s).

Ans.: Yes, the problem of disguised unemployment happens in other sectors as well. For example, there are thousands of casual worin the service sector in the urban area who search for daily employment. They are employed as painter, plumber etc. Many of them

not find work every day. Similarly, we see other people in the service sector where they may spend the whole day but earn very little.

19. Why do you think NREGA is referred to as „Right to work‟?

Ans.: The central government in India recently made a law implementing the Right to Work in 200 districts of India. It is ca

National Rural Employment Guarantee Act 2005. It is referred to as ‘Right to Work’ as all those who are able to & are in need of w

have been guaranteed 100 days of employment in a year by the govt. if the govt. fails in its duty to provide employment, it will g

unemployment allowance to the people.

20. What is an organized sector of economy?

Ans.: Organized sector covers those enterprises or places of work where the terms of employment are regular & therefore people h

assured work.

21.Why is the organized sector of economy so called?

Ans.: This sector is called Organized because it has some formal processes & procedures. They are registered by the governmen

have to follow its rules & regulations which are given in various laws such as the Factories Act, Minimum Wages Act, PaymenGratuity Act etc.

22. What are the benefits that are enjoyed by the people working in the organized sector?

Ans.: a) Workers in this sector enjoy security of employment

b) They are expected to work only a fixed number of hours & if they work more, they are paid over me by the employer.

c) They enjoy benefits like paid leaves, payment during holidays, provident fund, gratuity etc

d) They are supposed to get medical benefits & under the laws, the factory manager has to ensure facilities like drinking water &

working environment.

e) On retirement, the workers are even entitled to pensions as well.

23. What is unorganized sector of economy?

Ans.: This sector is characterized by small & scattered units which are largely outside the control of the govt. There are rule

regulations but which are not followed. Jobs here are low paid & even not regular.

24. What are the disadvantages that people have to suffer in the Unorganized Sector?Ans.: a) There is no job security as a lot depends on the whims of the employer & some people may be asked to leave.

b) There is no provision for over me, paid leave, holidays, leave due to sickness etc.

25. In the rural areas, who are the vulnerable people in the unorganized sector who need protection by the

government?

Ans.: In the rural areas, the unorganized sector mostly comprises of landless agricultural laborers, small & marginal farm

sharecroppers & ar sans (such as weavers, carpenters, goldsmiths etc). Nearly 80% of the rural household in India is in small & marg

farmer category. These farmers need to be supported through adequate facilities for timely delivery of seeds, agricultural inputs, cre

storage facility & marketing outlets.

26. In the urban areas, who are the vulnerable people in the unorganized sector who need protection by the

government?Ans.: In the urban areas, unorganized sector comprises mainly of the workers in small scale industries, casual workers in construct

trade & transport etc & those who work as street vendors, head load porters,rag pickers etc. Small scale industries also n

government’s support for processing r aw material & for marketing the output. Similarly, the casual workers also need protection in th

jobs & wages.

27.How do we classify the sectors of Indian economy in terms of ownership?Ans.: In terms of ownership, we can classify the sectors as Private & Public sectors. In the Public sector, govt. owns most of the as

& provides all the services. Example: Railways or post office.In Private sector, ownership of assets & delivery of services is in the han

of private individuals or companies. Example: Reliance Industries Ltd (RIL), Tata Iron & Steel Company Ltd (TISCO).

28. Why do we need to have Public sector in a society when we have the Private sector providing quality services? Give reas

for your answer.

Ans.: We need to have Public Sector for the following reasons:

a) Advances in a private sector are guided by the motive to earn profits. However, the purpose of the public sector is not to earn pro

but to provide services to the people.

b) There are several things needed by the society as a whole but which the private sector will not provide at a reasonable cost as th

need spending large sums of money which is beyond the capacity of the private sector.

c) Also, collecting money from thousands of people who use these facilities is not easy. Even if the private sector provides these thin

they would charge a high rate for their use. Thus, governments have to undertake such heavy spending & ensure these facilities

available to all.



Solutions of NCERT Textbook Exercise

Q.1: Fill in the blanks using the correct option given in the bracket:

(i) Employment in the service sector ______ increased to the same extent as production.

(ii) Workers in the ___________ sector do not produce goods.

(iii) Most of the workers in the _________ sector enjoy job security.

(iv) A _________ proportion of labourers in India are working in the unorganized sector.

(v) Cotton is a ___________ product and cloth is a_________ product.

(vi) The activities in primary, secondary and tertiary sectors are __________.

Ans: (i) has not (ii) tertiary (iii) organized (iv) large (v) natural, manufactured (vi) interdependent

Q.2: Choose the most appropriate answer:

(a) The sectors are classified into public and private sector on the basis of:

(b) Production of a commodity mostly through the natural process is an activity in ________ sector.

(c) GDP is the total value of __________ produced during a particular year.

(d) In terms of GDP the share of tertiary sector, in 2003 is ____________.

Ans: (a) ownership of enterprise (b) primary (c) all final goods and services (d) between 50 percent and 60 percent.

Q.3: Find the odd one out and say why.

(i) Tourist guide, dhobi, tailor, potter.

(ii) Teacher, doctor, vegetable vendor, lawyer.

(iii) Postman, cobbler, soldier, police constable.

(iv) MTNL, Indian Railways, Air India, Sahara Airlines, All India Radio.

Ans: (i) Potter, because only the potter relates to secondary sector.

(ii) Vegetable vendor, since only this directly help in the production of goods.

(iii) Cobbler because, only cobbler falls in private sector.

(iv) Sahara Airlines, as this is only a private sector company in the group.

Q.4: Do you think the classification of economic activities into primary, tertiary and secondary is useful? Explain how.

Ans:

The classification of economic activities into primary, tertiary and secondary is useful on account of the information it provi

on how and where the people of a country are employed.

Also this helps in ascertaining as to which sector of economic activity contri butes more or less to the country’s GDP and

capita income.

If the tertiary sector is developing much faster than the primary sector, then it implies that agriculture is depleting, and

government must take measures to rectify this.

The knowledge that the agricultural profession is becoming unpopular or regressive can only come if we know which secto

belongs to.

Hence it is necessary to classify economic activities into these there sectors for smooth economic administration

development.

Q.5: For each of the following sectors that we came across in this chapter why should one focus on employment and GDP? Co

there be other issues which should be examined? Discuss.

Ans:

For each of the sectors mentioned in this chapter our focus should definitely be on employment and GDP. This is beca

growth in GDP and full employment are common goals of Five Year Plans and they also determine the size of a countreconomy.

A focus on employment and GDP helps us to calculate and monitor the most important factors like: per capita inco

productivity, changes in employment rate and contribution to GDP by the three sectors of economy and thus, takes neces

steps required for the upliftment of the country’s economy as a whole.

Yes, the other issues which should be examined are -

1. balanced regional development



2. equality in income and wealth among the people of the country.

3. how to eradicate poverty

4. modernization of technology

5. self-reliance of the country

6. how to achieve surplus food production in the country.

Q.6.: How is the tertiary sector different from other sectors? Illustrate with few examples.

Ans:

The tertiary sector different from other two sectors. This is because other two sectors produce goods but, this sector does produce goods by itself.

But the activities under this sector help in the development of the primary and secondary sectors. These activities are an aid

support for the production process.

For example, transport, communication, storage, banking, insurance, trade activities etc.

For this reason this sector is also known as service sector.

Q.7: What do you understand by disguised unemployment? Explain with an example each from the urban and rural areas.

Ans:

Disguised Unemployment is a kind of unemployment in which there are people who are visibly employed but are actu

unemployed. This situation is also known as Hidden Unemployment.

In such a situation more people are engaged in a work than required.

For example in rural areas, this type of unemployment is generally found in agricultural sector like - in a family of 9 people

are engaged in the same agricultural plot. But if 4 people are withdrawn from it there will be no reduction in output. So, thes people are actually disguisedly employed.

In urban areas, this type of unemployment can be seen mostly in service sectors such as in a family all members are engage

one petty shop or a small business which can be managed by less number of persons.

Q.8: Distinguish between open unemployment and disguised unemployment.

Ans:

Open Unemployment - When a country’s labour force do not get opportunities fro adequate employment, this situatio

called open unemployment. This type of unemployment is generally found in the industrial sector of our country. This is

found among the landless agricultural labourers in rural areas.

Disguised Unemployment - This is a kind of unemployment in which there are people who are visibly employed but actu

they don’t have full employment. In such a situation more people are engaged in a work than required. This type

unemployment is generally found in unorganized sector where either work is not constantly available or too many people

employed for the same work that does not require so many hands.

Q.9: Tertiary sector is not playing any significant role in the development of Indian economy. Do you agree/ Give reason

support of your answer.

Ans: No, I do not agree with the statement that tertiary sector is not playing any significant role in the development of Indian econo

The reasons are as follows:

1. In terms of GDP this sector emerged as the largest producing sector in India surpassing the primary and secondary sectors. In 19

the share of the tertiary sector in GDP was about 35% which increased to more than 50% in 2003. Over the thirty years between 19

and 2003, while production in all three sectors increased, it has been the most in tertiary sector.

2. In terms of employment also the rate of growth of employment in tertiary sector between the same period was nearly 250%. This

negligible in primary sector.

Q.10: Service sector in India employs two different kinds of people. Who are these?Ans: The service sector in India employs the following two different kinds of people. They are:

(a) The people involved in the services that may directly help in the production of goods. For example, people involved in

transportation, storage, communication, finance etc.

(b) The people involved in such services that may not directly help in the production of goods e.g. teachers, doctors, barbers, cobb

lawyers etc. They may be termed as ancillary workers means those who give services to the primary service providers.

Q.11: Workers are exploited in the unorganized sector. Do you agree with this view.? Give reasons in support of your answer

Ans: Yes, workers are exploited in the unorganized sector. This would be clear from the following points:

1. There is no fixed number of working hours. The workers normally work 10 - 12 hours without paid overtime.

2. They do not get other allowances apart fro the daily wages.

3. Government rules and regulations to protect the labourers are not followed there.



4. There is no job security.

5. Jobs are low paid the workers in this sector are generally illiterate, ignorant and unorganized. So they are not in a position to barg

or secure good wages.

6. Being very poor they are always heavily in debt. So, they can be easily made to accept lower wages.

Q.12: How are the activities in the economy classified on the basis of employment conditions?

Ans: On the basis of employment conditions, the activities in the economy are classified into organized and unorganized sectors.

Organized Sector This sector covers those enterprises which are registered by the government and have to follow its rules

regulations. For example, Reliance Industries Ltd., GAIL etc.

Unorganized Sector It includes those small and scattered units which are largely outside the control of the government. Though thare rules and regulations but these are never followed here. For example, casual workers in construction, shops etc. In this sector ther

no job security and the conditions of employment are also very tough.

Q.13: Give three examples of Public Sector activities and explain why the government has taken up them.

Ans: The examples are:

Railways: The government has taken up it for the following reasons -

1. Only the government can invest large sums of money on the public project with long gestation period.

2. To ensure and provide transportation at cheap rate.

NTPC: The government has taken up it to provide electricity at a lower rate than the actual cost of production. The aim is to protect

encourage the private sector especially small scale industries.

AIIMS: To provide quality health services at reasonably cheap rate was the main purpose of the government to start this.

Q.14: Compare the employment conditions prevailing in the organized and unorganized sectors.

Ans:

Employment conditions in

Organized Sector

Employment conditions in

Unorganized Sector

1. The labour gets regular monthly salary. 1. The labour gets daily wages.

2. In addition to the salary, workers get several other benefits like - paid leave, PF, gratuity etc.

2. Workers do not any allowances apart from wages.

3. The daily working hours is fixed. 3. There is no fixed number of working hours.

4. The labourers are given an appointment letter stating

all terms and conditions of job.

4. There is no such provision.

5. People enjoy security of employment. Working

conditions are also good.

5. There is no job security. working conditions are very

tough.

Q.15: Explain how Public sector contributes to the economic development of a nation.

Ans: In the following ways Public sector contributes to the economic development of a nation:

1. It promotes rapid economic development through creation and expansion of infrastructure.

2. It creates employment opportunities.

3. It generates financial resources for development.

4. It is ensuring equality of income, wealth and thus, a balanced regional development.

5. It encourages development of small, medium and cottage industries.

6. It ensures easy availability of goods at moderate rates.

7. Contributes to community development i.e. to the Human Development Index (HDI) via health and educational services.

sectors of the indian economy

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