| Latest Economics NCERT Notes, Solutions and Extra Q & A (Class 9th to 12th) | |||||||||||||||||||
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| 9th | 10th | 11th | 12th | ||||||||||||||||
| Class 10th Chapters | ||
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| 1. Development | 2. Sectors Of The Indian Economy | 3. Money And Credit |
| 4. Globalisation And The Indian Economy | 5. Consumer Right | |
Chapter 2 Sectors Of The Indian Economy
This chapter explains how economic activities are classified to understand the structure of an economy. It introduces the three main sectors: the Primary Sector (activities based on natural resources, like agriculture), the Secondary Sector (manufacturing or industrial activities), and the Tertiary Sector (services). A key takeaway is that these sectors are highly interdependent; the growth of one relies on the others. The total value of all final goods and services produced across these three sectors within a year is known as the Gross Domestic Product (GDP), which measures the size of the economy.
The chapter highlights a significant structural shift in the Indian economy. While the Tertiary sector has become the largest contributor to India's GDP, a similar shift has not occurred in employment. The Primary sector, mainly agriculture, continues to be the largest employer, despite contributing the least to the GDP. This mismatch leads to the critical problem of underemployment or disguised unemployment, where more people are working than necessary, leading to low productivity and income. The chapter also classifies the economy based on working conditions into the Organised Sector (with job security and benefits) and the Unorganised Sector (characterized by low pay, job insecurity, and lack of benefits), where a majority of Indians work. Lastly, it differentiates between the Public Sector (government-owned) and the Private Sector (privately-owned) based on ownership of assets.
Primary, Secondary and Tertiary Sectors of Economy
Economic activities are actions that involve the production, distribution, and consumption of goods and services. To understand these diverse activities, we classify them into groups called sectors. The most common classification is based on the nature of the activity.
1. Primary Sector
This sector includes activities that are undertaken by directly using natural resources. It forms the base for all other products we subsequently make. When we produce a good by exploiting natural resources, it is an activity of the primary sector. Since most of the products in this sector are obtained from agriculture, dairy, fishing, and forestry, it is also called the agriculture and related sector.
Examples:
- Cultivation of cotton: Depends on natural factors like rainfall, sunshine, and climate. The product, cotton, is a natural product.
- Dairy farming: Depends on the biological process of animals and the availability of fodder. The product, milk, is a natural product.
- Mining: Extraction of minerals and ores from the earth.
- Fishing and Forestry: Harvesting resources directly from nature.
2. Secondary Sector
This sector covers activities in which natural products are changed into other forms through ways of manufacturing. It is the next step after the primary sector. The product is not produced by nature but has to be made in a factory, a workshop, or at home. Since this sector is associated with different kinds of industries, it is also called the industrial sector.
Examples:
- Spinning yarn and weaving cloth: Using cotton fibre (a primary product) as a raw material.
- Making sugar or gur: Using sugarcane (a primary product) as a raw material.
- Brick making: Converting earth (a natural resource) into bricks to build houses.
3. Tertiary Sector
This category includes activities that help in the development of the primary and secondary sectors. These activities, by themselves, do not produce a good but they are an aid or a support for the production process. Since these activities generate services rather than goods, the tertiary sector is also called the service sector.
Examples:
- Transport and Storage: Goods produced in primary or secondary sectors need to be transported by trucks or trains and stored in godowns.
- Communication and Banking: Talking to others over the telephone or borrowing money from banks to help production and trade.
- Essential Services: This sector also includes services that may not directly help in production but are essential for society, such as teachers, doctors, lawyers, barbers, and people in administrative jobs.
- Modern Services: In recent times, new services based on information technology like internet cafes, call centres, and software companies have become important.
Interdependence of the Sectors
The three sectors of the economy are highly interdependent. The growth of one sector depends on the growth of the others.
- The secondary sector is dependent on the primary sector for raw materials. For example, if farmers (primary sector) refuse to sell sugarcane, a sugar mill (secondary sector) will have to shut down.
- The primary sector is dependent on the secondary sector for manufactured goods like tractors, pumpsets, fertilizers, and pesticides. If the price of these goods goes up, the cost of cultivation for farmers will rise.
- Both primary and secondary sectors depend on the tertiary sector for services. For instance, if transporters (tertiary sector) go on strike, farmers will be unable to sell their products in urban areas, leading to food scarcity for people working in industrial and service sectors.
Comparing the Three Sectors and Historical Change
The primary, secondary, and tertiary sectors produce a vast number of goods and services and employ a large number of people. To understand their contribution, we need a way to measure their output.
Measuring Total Production: Gross Domestic Product (GDP)
It is impossible to simply add up the physical quantity of diverse goods like cars, computers, and coconuts. To solve this, economists suggest using the monetary value of these goods and services.
However, a crucial precaution must be taken: we must only count the value of final goods and services.
Final Goods vs. Intermediate Goods
- Intermediate Goods: These are goods used up in producing final goods and services. For example, wheat sold to a flour mill and the flour sold to a biscuit company are intermediate goods.
- Final Goods: These are goods that finally reach the consumers and are not used for further production. In the example, the biscuits sold to consumers are the final good.
We only count the value of final goods because their value already includes the value of all the intermediate goods used in their production. If we counted the value of wheat, then flour, and then biscuits separately, we would be counting the value of wheat multiple times, leading to an incorrect total.
Definition of GDP
The Gross Domestic Product (GDP) of a country is the value of all final goods and services produced within a country during a particular year. The sum of production in the three sectors gives the GDP. It indicates the size of an economy.
$ \text{GDP} = \text{Value of final goods and services produced in Primary Sector} $$ + \text{Secondary Sector} $$ + \text{Tertiary Sector} $
In India, this task is undertaken by a central government ministry, which collects information from various government departments across all states and union territories.
Historical Change in Sectors
The history of developed countries reveals a general pattern of shifts in the importance of sectors as development progresses:
- Initial Stage (Dominance of Primary Sector): In the early stages of development, the primary sector was the most important. Most people were employed in agriculture, and most of the goods produced were natural products.
- Second Stage (Shift to Secondary Sector): Over time, with new methods of manufacturing and the rise of factories, the secondary sector grew in importance. Many people moved from farms to factories. The industrial sector became the most important in total production and employment.
- Third Stage (Shift to Tertiary Sector): In the last 100 years in developed countries, there has been a further shift from the secondary to the tertiary sector. The service sector has become the most important in terms of total production, and most working people are employed in services. This is the general pattern observed in developed countries.
Sectors of the Indian Economy: Production and Employment
Rising Importance of the Tertiary Sector in Production
In India, over the forty years between 1973-74 and 2013-14, production in all three sectors increased, but it increased the most in the tertiary sector. By 2013-14, the tertiary sector emerged as the largest producing sector in India, replacing the primary sector. Several reasons contribute to this shift:
- Demand for Basic Services: In any developing country, the government must provide basic services like hospitals, schools, police stations, courts, banks, and transport, which all fall under the tertiary sector.
- Development of Other Sectors: The development of the primary and secondary sectors leads to a greater demand for services like transport, trade, and storage.
- Rising Income Levels: As incomes rise, people demand more services like tourism, shopping, private schools, and professional training.
- Growth of New Services: Over the last decade, new services based on information and communication technology have become essential and have been rising rapidly.
It's important to note that the growth within the service sector is uneven. While highly skilled jobs have grown, a large number of people are engaged in low-paying services like small shops or repair work because they lack other opportunities.
Employment Share and the Problem of Underemployment
A remarkable fact about India is that while the share of sectors in GDP has shifted significantly towards the tertiary sector, a similar shift has not occurred in employment. The primary sector continues to be the largest employer.
This is because not enough jobs were created in the secondary and tertiary sectors. While production in these sectors grew manifold, employment grew at a much slower pace.
As a result, more than half of the workers in the country are working in the primary sector (mainly agriculture), producing only about one-sixth of the GDP. This indicates a problem of underemployment or disguised unemployment.
What is Underemployment?
Underemployment is a situation where people are apparently working, but all of them are made to work less than their potential. Their labor effort gets divided. It is hidden, unlike open unemployment where a person has no job.
For example, if a small farm requires only three people to work on it, but five members of the family are engaged in the work because they have nowhere else to go, the two extra people are underemployed. Even if these two people are removed, the production of the farm will not be affected. Their contribution is almost nil.
This phenomenon is not just confined to agriculture but can also be seen in the urban service sector, where people like painters or cart-pushers may spend the whole day working but earn very little because they don't find work regularly or have better opportunities.
How to Create More Employment?
To tackle underemployment and unemployment, employment generation is crucial. Some ways to achieve this include:
- Investment in Rural Infrastructure: The government can spend money or banks can provide loans to construct wells, dams, and canals. This would allow farmers to grow a second crop, creating more employment within agriculture itself. Better rural roads and storage facilities can also create jobs in transport and trade.
- Provision of Cheap Credit: Providing cheap agricultural credit allows farmers to buy seeds, fertilizers, and equipment in time, improving their productivity and income.
- Promoting Local Industries: Identifying, promoting, and locating industries and services in semi-rural areas can generate employment. For example, setting up dal mills, cold storages, or honey collection centres.
- Investment in Social Services: Improving education and health facilities can create a significant number of jobs for teachers, doctors, nurses, and other staff.
- Developing Tourism and Crafts: Every region has potential in areas like tourism or regional crafts, which, with government support, can create many jobs.
As a short-term measure with a legal guarantee, the central government implemented the Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA 2005). Under this Act, all those who are able to and are in need of work in rural areas are guaranteed 100 days of employment in a year by the government. If the government fails to provide employment, it must give unemployment allowances. This is also referred to as the 'Right to Work'.
Division of Sectors as Organised and Unorganised
Another way to classify economic activities is based on employment conditions and whether the enterprise follows government rules and regulations.
Comparing the Organised and Unorganised Sectors
The difference in working conditions can be understood through the examples of Kanta (working in an office) and Kamal (a daily wage labourer).
| Feature | Kanta (Organised Sector) | Kamal (Unorganised Sector) |
|---|---|---|
| Nature of Enterprise | Works in enterprises registered by the government. | Works in small, scattered units outside government control. |
| Terms of Employment | Regular and assured work. Follows rules and regulations (e.g., Factories Act, Minimum Wages Act). | Jobs are low-paid and often not regular. Rules are not followed. |
| Job Security | Enjoys security of employment. Cannot be removed without a proper process. | Employment is not secure. Can be asked to leave anytime without reason. |
| Working Hours | Works for a fixed number of hours. Gets paid for overtime. | No fixed working hours, often works long hours with no overtime pay. |
| Benefits and Leave | Gets benefits like paid leave, provident fund, gratuity, and medical benefits. Paid holidays (e.g., Sunday). | No provision for overtime, paid leave, holidays, or leave due to sickness. Not paid for days not worked. |
| Working Environment | Manager must ensure facilities like drinking water and a safe working environment. | Facilities and safety measures are often lacking. |
How to Protect Workers in the Unorganised Sector?
While jobs in the organised sector are highly sought-after, their growth has been very slow. A large number of workers are forced to work in the unorganised sector where they are often exploited, paid low wages, and have no job security or benefits.
Protection and support for these workers are necessary for both economic and social development. These vulnerable people include:
- In Rural Areas: Landless agricultural labourers, small and marginal farmers, sharecroppers, and artisans (weavers, blacksmiths, etc.). They need support through timely delivery of seeds, credit, storage, and marketing facilities.
- In Urban Areas: Workers in small-scale industries, casual workers in construction and trade, street vendors, head-load workers, and rag pickers. They need protection and government support for raw materials and marketing.
Furthermore, a majority of workers from Scheduled Castes, Scheduled Tribes, and backward communities are found in the unorganised sector, where they face not just economic hardship but also social discrimination.
Sectors in Terms of Ownership: Public and Private Sectors
A final way to classify economic activities is based on who owns the assets and is responsible for the delivery of services.
1. Public Sector
In the public sector, the government owns most of the assets and provides all the services. The main purpose of the public sector is not to earn profits but to ensure public welfare. The government raises money through taxes and other means to meet expenses on the services it provides.
Examples: Railways, Post Office, government hospitals, and schools.
2. Private Sector
In the private sector, ownership of assets and delivery of services is in the hands of private individuals or companies. Activities in the private sector are guided by the motive to earn profits. To get services from this sector, we have to pay money to these individuals and companies.
Examples: Companies like Tata Iron and Steel Company Limited (TISCO), Reliance Industries Limited (RIL), private schools, and private hospitals.
Role and Necessity of the Public Sector
The government (public sector) must provide certain goods and services because the private sector may not be able to or willing to provide them at a reasonable cost. The government's role is crucial in the following areas:
- Providing Large-Scale Infrastructure: Some services like the construction of roads, bridges, railways, and dams require huge sums of money that are beyond the capacity of the private sector. The government must undertake such heavy spending to ensure these facilities are available to everyone.
- Supporting Key Economic Activities: The government has to support some activities that the private sector might not continue without encouragement. For example, the government produces and supplies electricity at affordable rates so that small-scale industries can function. Similarly, it buys wheat and rice from farmers at a 'fair price' and sells it at a lower price to consumers through ration shops, thus supporting both farmers and consumers.
- Ensuring Primary Responsibilities: There are many activities that are the primary responsibility of the government. This includes providing quality education and healthcare facilities for all, ensuring the availability of safe drinking water, housing for the poor, and proper nutrition. It is the duty of the government to take care of the poorest and most ignored regions of the country.
NCERT Questions Solution
Intext Questions (Pages No. 21)
Question 1. Complete the above table to show how sectors are dependent on each other.
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Question 2. Explain the difference between primary, secondary and tertiary sectors using examples other than those mentioned in the text.
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Question 3. Classify the following list of occupations under primary, secondary and tertiary sectors:
• Tailor
• Basket weaver
• Flower cultivator
• Milk vendor
• Fishermen
• Priest
• Courier
• Workers in match factory
• Moneylender
• Gardener
• Potter
• Bee-keeper
• Astronaut
• Call centre employee
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Question 4. Students in a school are often classified into primary and secondary or junior and senior. What is the criterion that is used? Do you think this is a useful classification? Discuss.
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Intext Questions (Pages No. 23)
Question 1. What does the history of developed countries indicate about the shifts that have taken place between sectors?
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Question 2. Correct and arrange the important aspects for calculating GDP from this Jumble.
To count goods and services we add the numbers that are produced. We count all those that were produced in the last five years. Since we shouldn’t leave out anything we add up all these goods and services.
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Question 3. Discuss with your teacher how you could calculate the total value of a good or service by using the method of value added at each stage.
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Intext Questions (Pages No. 24)
Question 1. Answer the following questions by looking at the graph:
1. Which was the largest producing sector in 1973-74?
2. Which is the largest producing sector in 2013-14?
3. Can you say which sector has grown the most over forty years?
4. What was the GDP of India in 2013-14?
Answer:
Intext Questions (Pages No. 27)
Question 1. Complete the table using the data given in Graphs 2 and 3 and answer the question that follows. Ignore if data are not available for some years.
| 1973-74 | 1977-78 | 2013-14 | 2017-18 | |
|---|---|---|---|---|
| Share in GDP | ||||
| Share in employment |
What are the changes that you observe in the primary sector over a span of forty years?
Answer:
Question 2. Choose the correct answer:
Underemployment occurs when people
(i) do not want to work
(ii) are working in a lazy manner
(iii) are working less than what they are capable of doing
(iv) are not paid for their work
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Question 3. Compare and contrast the changes in India with the pattern that was observed for developed countries. What kind of changes between sectors were desired but did not happen in India?
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Question 4. Why should we be worried about underemployment?
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Intext Questions (Pages No. 29)
Question 1. Why do you think MGNREGA 2005 is referred to as ‘ Right to work’ ?
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Question 2. Imagine that you are the village head. In that capacity suggest some activities that you think should be taken up under this Act that would also increase the income of people? Discuss.
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Question 3. How would income and employment increase if farmers were provided with irrigation and marketing facilities?
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Question 4. In what ways can employment be increased in urban areas?
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Intext Questions (Pages No. 31)
Question 1. Look at the following examples. Which of these are unorganised sector activities?
(i) A teacher taking classes in a school
(ii) A headload worker carrying a bag of cement on his back in a market
(iii) A farmer irrigating her field
(iv) A doctor in a hospital treating a patient
(v) A daily wage labourer working under a contractor
(vi) A factory worker going to work in a big factory
(vii) A handloom weaver working in her house
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Question 2. Talk to someone who has a regular job in the organised sector and another who works in the unorganised sector. Compare and contrast their working conditions in all aspects.
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Question 3. How would you distinguish between organised and unorganised sectors? Explain in your own words.
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Question 4. The table below shows the estimated number of workers in India in the organised and unorganised sectors. Read the table carefully. Fill in the missing data and answer the questions that follow.
| Sector | Organised | Unorganised | Total |
|---|---|---|---|
| Primary | 1 | 232 | |
| Secondary | 41 | 74 | 115 |
| Tertiary | 40 | 88 | 128 |
| Total | 82 | ||
| Total in Percentage | 100% |
· What is the percentage of people in the unorganised sector in agriculture?
· Do you agree that agriculture is an unorganised sector activity? Why?
· If we look at the country as a whole, we find that ———% of the workers in India are in the unorganised sector. Organised sector employment is available to only about ———% of the workers in India.
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Exercises
Question 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. (has / has not)
(ii) Workers in the _________ sector do not produce goods. (tertiary / agricultural)
(iii) Most of the workers in the _________ sector enjoy job security. (organised / unorganised)
(iv) A _________ proportion of labourers in India are working in the unorganised sector. (large / small)
(v) Cotton is a _________ product and cloth is a _________ product. [natural /manufactured]
(vi) The activities in primary, secondary and tertiary sectors are_________ [independent / interdependent]
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Question 2. Choose the most appropriate answer.
(a) The sectors are classified into public and private sector on the basis of:
(i) employment conditions
(ii) the nature of economic activity
(iii) ownership of enterprises
(iv) number of workers employed in the enterprise
(b) Production of a commodity, mostly through the natural process, is an activity in _________ sector.
(i) primary
(ii) secondary
(iii) tertiary
(iv) information technology
(c) GDP is the total value of _________ produced during a particular year.
(i) all goods and services
(ii) all final goods and services
(iii) all intermediate goods and services
(iv) all intermediate and final goods and services
(d) In terms of GDP the share of tertiary sector in 2013-14 is between _________ per cent.
(i) 20 to 30
(ii) 30 to 40
(iii) 50 to 60
(iv) 60 to 70
Answer:
Question 3. Match the following:
| Problems faced by farming sector | Some possible measures |
|---|---|
| 1. Unirrigated land | (a) Setting up agro-based mills |
| 2. Low prices for crops | (b) Cooperative marketing societies |
| 3. Debt burden | (c) Procurement of food grains by government |
| 4. No job in the off season | (d) Construction of canals by the government |
| 5. Compelled to sell their grains to the local traders soon after harvest | (e) Banks to provide credit with low interest |
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Question 4. 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, Jet Airways, All India Radio
Answer:
Question 5. A research scholar looked at the working people in the city of Surat and found the following.
| Place of work | Nature of employment | Percentage of working people |
|---|---|---|
| In offices and factories registered with the government | Organised | 15 |
| Own shops, office, clinics in marketplaces with formal license | 15 | |
| People working on the street, construction workers, domestic workers | 20 | |
| Working in small workshops usually not registered with the government |
Complete the table. What is the percentage of workers in the unorganised sector in this city?
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Question 6. Do you think the classification of economic activities into primary, secondary and tertiary is useful? Explain how.
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Question 7. For each of the sectors that we came across in this chapter why should one focus on employment and GDP? Could there be other issues which should be examined? Discuss.
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Question 8. Make a long list of all kinds of work that you find adults around you doing for a living. In what way can you classify them? Explain your choice.
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Question 9. How is the tertiary sector different from other sectors? Illustrate with a few examples.
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Question 10. What do you understand by disguised unemployment? Explain with an example each from the urban and rural areas.
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Question 11. Distinguish between open unemployment and disguised unemployment.
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Question 12. “Tertiary sector is not playing any significant role in the development of Indian economy.” Do you agree? Give reasons in support of your answer.
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Question 13. Service sector in India employs two different kinds of people. Who are these?
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Question 14. Workers are exploited in the unorganised sector. Do you agree with this view? Give reasons in support of your answer.
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Question 15. How are the activities in the economy classified on the basis of employment conditions?
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Question 16. Compare the employment conditions prevailing in the organised and unorganised sectors.
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Question 17. Explain the objective of implementing the MG NREGA 2005.
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Question 18. Using examples from your area compare and contrast that activities and functions of private and public sectors.
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Question 19. Discuss and fill the following table giving one example each from your area.
| Well managed organisation | Badly managed organisation | |
|---|---|---|
| Public sector | ||
| Private Sector |
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Question 20. Give a few examples of public sector activities and explain why the government has taken them up.
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Question 21. Explain how public sector contributes to the economic development of a nation.
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Question 22. The workers in the unorganised sector need protection on the following issues : wages, safety and health. Explain with examples.
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Question 23. A study in Ahmedabad found that out of 15,00,000 workers in the city, 11,00,000 worked in the unorganised sector. The total income of the city in this year (1997-1998) was Rs 60,000 million. Out of this Rs 32,000 million was generated in the organised sector. Present this data as a table. What kind of ways should be thought of for generating more employment in the city?
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Question 24. The following table gives the GDP in Rupees (Crores) by the three sectors:
| Year | Primary | Secondary | Tertiary |
|---|---|---|---|
| 2000 | 52,000 | 48,500 | 1,33,500 |
| 2013 | 8,00,500 | 10,74,000 | 38,68,000 |
(i) Calculate the share of the three sectors in GDP for 2000 and 2013.
(ii) Show the data as a bar diagram similar to Graph 2 in the chapter.
(iii) What conclusions can we draw from the bar graph?
Answer: