Chapter 2 Sectors Of The Indian Economy

Sectors Of Economic Activities

Economic activities are classified into sectors based on the nature of the activity:

• Primary Sector: Activities involving the direct use of natural resources to produce goods. This includes agriculture, dairy, fishing, forestry, and mining. It forms the base for other sectors.
• Secondary Sector: Activities that transform natural products into manufactured goods through industrial processes. This includes manufacturing, construction, and industries that use raw materials from the primary sector (e.g., spinning yarn from cotton, making sugar from sugarcane).
• Tertiary Sector (Service Sector): Activities that help in the development of the primary and secondary sectors by providing services rather than goods. This includes transport, storage, communication, banking, trade, and various essential services like education, health, tourism, and IT-based services.

These sectors are interdependent; for instance, agriculture relies on industries for equipment and transport for selling produce, while industries depend on agriculture for raw materials and on the service sector for various support functions.

Primary, Secondary And Tertiary Sectors In India

Over the past forty years (1973-74 to 2013-14), India has seen a significant shift in the structure of its economy. The primary sector's share in GDP has declined, while the secondary sector's share has increased moderately. The tertiary sector has emerged as the largest producing sector, significantly surpassing both primary and secondary sectors in terms of its contribution to the Gross Domestic Product (GDP).

Rising Importance Of The Tertiary Sector In Production

The tertiary sector's growth in GDP is attributed to several factors: the need for basic services (hospitals, schools, police), increased demand for services supporting agriculture and industry (transport, trade), rising incomes leading to demand for consumer services (tourism, shopping, private education/healthcare), and the rapid growth of information and communication technology (ICT) based services.

Where Are Most Of The People Employed?

Despite the tertiary sector's dominant contribution to GDP, the primary sector (mainly agriculture) continues to be the largest employer in India. This is because the secondary and tertiary sectors have not generated enough jobs to absorb the surplus labor from agriculture. Consequently, a large portion of the workforce remains underemployed or engaged in disguised unemployment in agriculture, producing less than their potential, as their labor is spread thinly among too many people.

How To Create More Employment?

To address underemployment and unemployment, strategies include:

• Investing in Agriculture: Providing irrigation facilities, credit, storage, and marketing support can improve agricultural productivity and create more employment within the sector.
• Promoting Allied Activities: Developing industries related to agriculture, like food processing (dal mills, cold storage), can create jobs in semi-rural areas.
• Boosting Other Sectors: Investing in transportation, tourism, and ICT services can generate significant employment.
• Rights-Based Employment Schemes: Programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) guarantee 100 days of employment annually to rural workers, providing a safety net and potentially contributing to long-term development through useful projects.

Division Of Sectors As Organised And Unorganised

Economic activities can also be classified based on employment conditions:

• Organised Sector: Characterized by regular terms of employment, job security, fixed working hours, overtime pay, paid leave, holidays, and benefits like provident fund and pensions. Enterprises are registered with the government and follow its rules and regulations.
• Unorganised Sector: Marked by small, scattered units outside government control, often with irregular, low-paid, and insecure jobs. Workers lack benefits like paid leave, overtime, security, and are often subject to the employer's whims. This sector includes agricultural laborers, small farmers, street vendors, and repair persons.

Most workers in India are in the unorganised sector, facing exploitation, low wages, and lack of security. Protecting these workers through fair wages, safety regulations, and social security is crucial for both economic and social development.

Organised Sector

Offers secure, regular employment with benefits and adherence to government regulations.

Unorganised Sector

Characterized by lack of job security, low pay, irregular work, and absence of benefits and legal protections. Most workers, especially from marginalized communities, are found here.

Sectors In Terms Of Ownership: Public And Private Sectors

Economic activities can also be classified based on ownership:

• Public Sector: Most assets are owned and services are provided by the government. Examples include railways, post offices, and defense. The government's aim is not just profit but also welfare and providing essential services.
• Private Sector: Assets and services are owned and controlled by private individuals or companies, primarily motivated by profit. Examples include TISCO, Reliance Industries, and small shops.

Governments undertake public sector activities because:

• Some essential services require huge investments beyond private capacity or are difficult to charge users for (e.g., roads, dams, electricity generation).
• Some industries need government support to remain viable and affordable for consumers and other industries (e.g., providing electricity or buying agricultural produce at fair prices).
• Providing basic necessities like health, education, clean water, and housing for all is a primary government responsibility, crucial for human development.