SUMMARY SECTORS OF THE INDIAN ECONOMY

Department of Social Science

ECONOMICS(X)

CHAPTER 02

SECTORS OF THE INDIAN ECONOMY

§  The Activities which are conducted with the Objective to earn Money are called Economic Activities.

§  Some of these activities Produce goods and others Produce Services.

§  Activities are classified in Various Groups According to their Common Attributes, Which are known as Sectors.

§  Example, people going for work in factories, banks, schools, etc.

§  Economic Activities Can be Classified in Three Different Ways

            1) Primary, Secondary and Tertiary (Based on nature of Activity)

            2) Organized and Unorganized (Based on Employment Condition)

            3) Public and Private Sector (based on Ownership)

 PRIMARY SECTOR

§  Goods which are produced by exploiting natural resources come under the category of primary sector.

§   This sector is also called agriculture and related sector.

§  Example. Agriculture, Forestry ,Dairy ,Fishing,

§  Mining, etc.

SECONDARY SECTOR

§  Transformation of one good into another comes under the category of secondary sector.

§  Manufacturing is one of the important components of this sector.

§  Example: Transformation of sugarcane into sugar.

  TERTIARY SECTOR

§  The Activities that help in the Development of primary and secondary sectors are covered in tertiary sector.

§  These Sector do not Produce goods, they only Provides Services or Support to Primary and Secondary.

§  This is also known as service sector.

§  Tertiary support the Production Process.

§  Example  Transport, Communication, Storage,Banking,etc

§  It also included Essential services provided by Professionals Doctors, Teachers, Lawyers, etc.

§  Software Industry, Internet Cafe,ATM Booths,BPO,Call Centres,etc

COMPARING THREE SECTORS

These three sectors are highly interdependent on one another.

This can be explained with the Help of an example:

Farmers buy goods such as tractors, pump sets, fertilisers (manufacturing sector) to produce agricultural goods (primary sector). This shows dependence of primary sector on secondary sector.

Now farmers want to sell their output. For this, they need transport facilities. It shows dependence of primary sector on tertiary sector.

FINAL GOODS AND SERVICES

They are directly consumed by the consumers and are not mean for Further Production. For Example: By counting the value of Biscuit, we will also get the value of flour from which Biscuit is made and the value of wheat from which flour is Made. Therefore Biscuit is the Final goods and its value will only be counted to find the Production Level. Value of Intermediate goods (wheat,Flour,Sugar) are not Counted.

GROSS DOMESTIC PRODUCT

The Sum of the Value of all final goods and services produced in all the three sectors in a particular year is called the GDP of the Country. And sum of production in three sectors give Gross Domestic Production—GDP of the country.

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

GDP shows how big the economy is. Value of Primary+Secondary+Tertiary Sectors=GDP

 WHO MEASURE GDP IN INDIA

In India, the task of measuring GDP is undertaken by central government.

This Ministry, with the help of various government departments of all the Indian states and union territories, collects information relating to total volume of goods and services and their prices and then estimates the GDP.In India GDP Measured by CENTRAL STATISTICAL OFFICE (CSO) Working under Ministry of Statistics, Government of India.

HISTORICAL CHANGES IN THREE SECTORS

Developed Countries Have gone through Historic Changes in the Economic sector as the economic activities had gradually shifted from Primary to Secondary to Tertiary Sector

Now Service Sector has become the Most Important Sector. The shift of Economic Activities does not mean Complete Elimination of Previous Sectors, But the Importance and Dominance of Next Sector is Increased.

During 1950s and 1960s Indian Economy Depended on Agricultural and Related Activities.

Between 1973 and 2003 the Production of all Three Sectors has Increased Substantially, but most in the Tertiary Sector.

INITIAL STAGES 1950S AND 1960S

In the Initial stages of the development the Primary Sector was the most important sector of economic activity.

However at this stage most of the goods produced were natural products from the primary sector, hence most people were employed in this sector.

SECOND STAGE 1970s

Over a long time new methods of manufacturing were introduced, factories came up and started expanding.

People began to work in factories in large numbers, and also people started using factory goods in large numbers as they were cheap.

Secondary sector gradually became the most important in total production and employment.There was a shift and the importance of the sectors also changed.

THIRD STAGE 1973-2003

In past hundred, there has been a further shift from Secondary to Tertiary sector in the developed countries.

The service sector has become the most important in terms of total production. Most of working people are also employed in the service sector.

ROLE OF TERTIARY SECTOR IN INDIA

Over the forty years between 1970 and 2010, while production in all the three sectors has increased, it has increased the most in the tertiary sector.

As a result, in the year 2010-11, the Tertiary sector has emerged as the largest producing sector in India replacing the Primary sector.

Total GDP in India was Rs 10, 00,000 crore in 1970-1971 with Dominance of Primary Sector.

But in 2010-2011 the GDP is Rs 50, 00,000 Crore with Service Sector as dominant.

RISING IMPORTANCE OF TERTIARY SECTOR

First, in any country several services such as hospitals, educational institutions, post and  telegraph services, police stations, courts, village administrative offices, municipal corporations, defense,

Transport, banks, insurance companies, etc. are required.  These can be considered as basic services which has increased.

Second, the development of agriculture and industry leads to the development of services such as transport, trade, storage and the like, as we have already seen.  Greater the development of the primary and secondary sectors, more would be the 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.  You can see this change quite sharply in cities, especially in big cities.

Fourth, over the past decade or so, certain new services such as those based on information and communication technology have

Become important and essential. The production of these services has been rising rapidly. Globalization and New Services. IT,Communication,Technology.etc

However, you must remember that not all of the service sector is growing equally well.  Service sector in India

Employs many different kinds of   people. Small Section of Service Sector Employs High skilled and Educated Workers.

EMPLOYMENT OF PEOPLE IN DIFFERENT SECTORS

Employment Pattern in India;

·         Although, the share of Primary Sector in GDP of the Country, just 20% but after 65 years of Independence, it still employs more than 50% of the Population.

·          The Secondary and Tertiary Sectors have not created enough jobs to enable a substantial number of people to migrate from Agriculture to these sectors.

·         Many of the workman in Primary sector are Underemployed or Disguised Unemployed.

·         Disguised Unemployment also occurs in urban areas. There are thousands of casual workers like Plumbers,Painters,Repair Workers,Craft men,Carpenters,etc who search for Daily employment in the towns and Cities.

UNDER EMPLOYMENT OR DISGUISED UNEMPLOYMENT OR HIDDEN UNEMPLOYMENT

Disguised unemployment is a situation where the number of workers engaged in a job is much more than required. If some of them are withdrawn from the job, the total production will not fall. It means that marginal productivity of such workers is zero.

Let us understand it with the help of an example – Laxmi owning about 2 hectares of land is

Growing crops. All the five members of the family work on the plot throughout the year.

Suppose they produce 20 quintals of food grains. Now suppose instead of 5 only 3 members

Work next year and the output is still 20 quintals. It means that three members were enough

to work. The other two members are then said to be disguisedly unemployed.

HOW CAN CREATE MORE EMPLOYMENT

• The government can spend some money or Banks can provide a loan, to construct wells for irrigation.
• Dams can be constructed along with canals, which will lead to a lot of employment generation.
• Government can invest some money on the construction of roads for running mini trucks and providing jobs opportunity in transportation.
• Local Banks can provide credit at reasonable interest to the farmers for their farming to improve.
• Identify, promote and locate industries and services in semi-rural areas where a large number of people may be employed.
• Setting up of Dal mills, opening cold storages, honey collection centres and industries to process vegetables and other agricultural products, which can be sold in outside markets.
• More and more schools should be opened which would create about 20 lakhs jobs in the education sector alone.
• To improve the health situation, we need more Doctors, Nurses, Health workers, etc. to work in the rural areas.
• If Tourism as a sector is improved every year, we can give additional employment to more than 35 lakh people 

NREGA Scheme 2005

Mahatma Gandhi Rural Employment Guarantee Act (NREGA) was formulated in 2005 and launched on 2^nd Feb 2006.later this Programme renamed into Mahatma Gandhi National Rural Employment Guarantee act. It Targeted SC/ST and women’s suffering from Poverty in the rural Areas. The Scheme guarantees 100 days (recently amended to 150 days in drought affected areas) of wage employment in a year to every rural households in 625 Districts of the Country. The Gram panchayat after proper verification will register households and issues job cards to them. This act also called Right to Work because if the Government fails in its duty to provide employment It will give Unemployment allowance to the People.

DIVISION OF SECTORS BASED ON NATURE OF EMPLOYMENT

ORGANISED SECTOR

Terms of employment are regular, so people have assured work. Registered by the government. Follows rules and regulations given in various laws.

There has some formal processes and procedures.These enterprises follows Factories Act, Minimum Wages Act, and Payment of Gratuity Act etc.

They receives following Facilities

Ø  Paid leave

Ø  Payment during holidays

Ø  Provident fund

Ø  Medical benefits

Ø  Workers get pension after retirement

UNORGANIZED SECTOR

Ø  Characterized by Small and scattered units which are largely outside the control of the government.

Ø  There are rules and regulations but these are not followed.

Ø  Low paid jobs and are not regular.

Ø  There is no provision for overtime, No Paid leave, No Holidays, leave due to sickness…..

Ø  Employment is not secure

Ø  Example: farmers work on their own and hire laborers as and when they require. Some people can also be asked to leave the job

SECTORS IN TERMS OF OWNERSHIP

The economic Activities can also be classified on the Basis of Ownership Which means who owns the Assets, and who is responsible for Delivery of Services.

Based on Ownership Sectors Categorized into Two;

PUBLIC SECTOR

Organized by government.It provides facilities to the workers like - Fixed employment, Fixed working hours.

Main aim is to provide public welfare.

Examples of Public sector are - Indian Railways, Government hospital, Public Parks, libraries, Indian Post,Indian Railways etc

PRIVATE SECTOR

Organized by private individuals. Does not provide fixed employment & fixed working hours to workers.

Main aim is to make many profits for themselves. Examples of Private sector are - Birla Company, Reliance, Hindustan Uniliver,TISCO,Airtel,Vodafone  etc.

QUALITIES OF PUBLIC SECTOR

v  Job security

v  More relaxed atmosphere.

v   It helps to Develop Infrastructure like Transport, Power, Heavy Industries, Buildings, Roads and Railways Help to develop backward Regions.

v  Stood for the Overall Development of The Country