Eco L2 – Sectors of the Indian Economy Different Economic Activities
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Eco L2 – Sectors of the Indian Economy Sectors of the Economy
Primary Secondary Tertiary
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Eco L2 – Sectors of the Indian Economy Sectors of the Economy
• Man interacts directly with the nature to Secondary Tertiary
Primary produce goods and services
• Agriculture, Dairy, Mining are examples
• It forms the base for all other products
that we subsequently make. Hence the
name Primary Sector
• It is also called agriculture and related
sector
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Eco L2 – Sectors of the Indian Economy Sectors of the Economy
• It covers activities in which natural Tertiary
Primary
products are changed into other forms
Secondary
through ways of manufacturing that we
associate with industrial activity
• Cotton – Cotton Textile
• Milk – Milk products
• Iron ore – Iron and Steel
• Since this sector gradually became
associated with the different kinds of
industries that came up, it is also called
as industrial sector.
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Eco L2 – Sectors of the Indian Economy Sectors of the Economy
• These are activities that help in the
Secondary
Primary
development of the primary and
Tertiary
secondary sectors.
• These activities, by themselves, do not
produce a good but they are an aid or a
support for the production process.
• Transportation, communication,
banking, finance, storage, teaching…
• Since these activities generate services
rather than goods, the tertiary sector is
also called the service sector.
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Eco L2 – Sectors of the Indian Economy Sectors of the Economy
• Service sector also includes some
Secondary
Primary
essential services that may not directly
Tertiary
help in the production of goods. For
example, we require teachers, doctors,
and those who provide personal services
such as washermen, barbers, cobblers,
lawyers, and people to do administrative
and accounting works. In recent times,
certain new services based on information
technology such as internet cafe, ATM
booths, call centres, software companies
etc have become important.
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Eco L2 – Sectors of the Indian Economy Inter-dependence of the sectors
Primary Secondary Tertiary
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Eco L2 – Sectors of the Indian Economy Comparing the Three Sectors
• Activities in the three sectors results in the production very large number of
goods and services
• The three sectors have a large number of people working in them to produce
these goods and services
• The next step, therefore, is to see how much goods and services are produced
and how many people work in each sector.
• In an economy one sector could dominate while other two sectors remain small
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Eco L2 – Sectors of the Indian Economy How to count goods and services produced?
• With so many thousands of goods and services produced, you might think this is
an impossible task! Not only would the task be enormous, but you might also
wonder how we can add up cars and computers and nails and furniture. It won’t
make sense!!!
• You are right in thinking so. To get around this problem, economists suggest that
the values of goods and services should be used rather than adding up the actual
numbers. For example, if 10,000 kgs of wheat is sold at Rs 8 per kg, the value of
wheat will be Rs 80,000. The value of 5000 coconuts at Rs 10 per coconut will be
Rs 50,000. Similarly, the value of goods and services in the three sectors are
calculated, and then added up.
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Eco L2 – Sectors of the Indian Economy How to count goods and services produced?
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Eco L2 – Sectors of the Indian Economy How to count goods and services produced?
• It makes sense only to include the final goods and
services. Take, for instance, a farmer who sells
wheat to a flour mill for Rs 8 per kg. The mill grinds
the wheat and sells the flour to a biscuit company
for Rs 10 per kg. The biscuit company uses the flour
and things such as sugar and oil to make four
packets of biscuits. It sells biscuits in the market to
the consumers for Rs 60 (Rs 15 per packet). Biscuits
are the final goods, i.e., goods that reach the
consumers
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Eco L2 – Sectors of the Indian Economy How to count goods and services produced?
• Why are only ‘final goods and services’ counted? In
contrast to final goods, goods such as wheat and the
wheat flour in this example are intermediate goods.
Intermediate goods are used up in producing final
goods and services. The value of final goods already
includes the value of all the intermediate goods that
are used in making the final good. Hence, the value
of Rs 60 for the biscuits (final good) already includes
the value of flour (Rs 10). Similarly, the value of all
other intermediate goods would have been
included.
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Eco L2 – Sectors of the Indian Economy
1. What is Primary Sector? Why is it called so?
2. Explain with examples, the interdependence of the three sectors of the economy.
3. Why should only the value of final goods and services be counted? Explain with
examples.
Cotton cultivator – transportation….- cotton mill
What cultivator – t, c,….- bread
Milk – tertiary – milk products
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Eco L2 – Sectors of the Indian Economy How to count goods and services produced?
• The value of final goods and services produced in each sector during a particular
year provides the total production of the sector for that year. And the sum of
production in the three sectors gives what is called the Gross Domestic Product
(GDP) of a country. It is the value of all final goods and services produced within a
country during a particular year. GDP shows how big the economy is.
• In India, the mammoth task of measuring GDP is undertaken by a central
government ministry. 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.
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Eco L2 – Sectors of the Indian Economy Historical Change in Sectors
In the Early Years
• In early years, even in developed countries, Primary Sector was the dominant
sector
• Methods of agriculture changed, and there was surplus produce.
• New occupations like trading, craft, transportation came up
• At this stage, most of the goods produced were natural products from the
primary sector
• Most people were employed in the Primary Sector
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Eco L2 – Sectors of the Indian Economy Historical Change in Sectors
During Industrial Revolution
• Methods of production changed. Factories came up
• People migrated from villages to cities
• Wide range of industrial products were available at cheap rates
• Secondary sector gradually became the most important in total production
and employment
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Eco L2 – Sectors of the Indian Economy Historical Change in Sectors
In the past 100 years
• There has been a further shift from Secondary to Tertiary in developed
countries.
• The service sector has become the most important in terms of total
production.
• Most of the working people are also employed in the service sector.
• This is the general pattern observed in developed countries.
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Eco L2 – Sectors of the Indian Economy
PRIMARY, SECONDARY AND TERTIARY
SECTORS IN INDIA
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PRIMARY, SECONDARY AND TERTIARY SECTORS
Eco L2 – Sectors of the Indian Economy
IN INDIA
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Eco L2 – Sectors of the Indian Economy Why is tertiary sector becoming important?
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Eco L2 – Sectors of the Indian Economy Why is tertiary sector becoming important?
2 Development of Agriculture and
Industry leads to development of
services like transportation, storage,
trade etc.
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Eco L2 – Sectors of the Indian Economy Why is tertiary sector becoming important?
3
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
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Eco L2 – Sectors of the Indian Economy Why is tertiary sector becoming important?
4
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.
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Eco L2 – Sectors of the Indian Economy Is everyone benefitted?
Highly Skilled Unskilled and Semiskilled
The disparity in
the Tertiary
Sector
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Eco L2 – Sectors of the Indian Economy GDP and Employment by Sectors - Comparison
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Eco L2 – Sectors of the Indian Economy GDP and Employment by Sectors - Comparison
Sector Contribution to GDP Contribution to Employment
Years 1973-74 2013-14 1977-78 2017-18
Primary 40% 12% 71% 44%
Secondary 11% 20% 11% 25%
Tertiary 49% 68 % 18% 31%
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Eco L2 – Sectors of the Indian Economy GDP and Employment by Sectors - Comparison
Sector Contribution to GDP Contribution to Employment
Years 1973-74 2013-14 1977-78 2017-18
Primary 40% 12% 71% 44%
Secondary 11% 20% 11% 25%
Tertiary 49% 68 % 18% 31%
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Eco L2 – Sectors of the Indian Economy GDP and Employment by Sectors - Comparison
Sector Contribution to GDP Contribution to Employment
Years 1973-74 2013-14 1977-78 2017-18
Primary 40% 12% 71% 44%
Secondary 11% 20% 11% 25%
Tertiary 49% 68 % 18% 31%
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Eco L2 – Sectors of the Indian Economy GDP and Employment by Sectors - Comparison
Primary Sector
continues to be the
biggest employer
Sector Contribution to GDP Contribution to Employment
Years 1973-74 2013-14 1977-78 2017-18
Primary 40% 12% 71% 44%
Secondary 11% 20% 11% 25%
Tertiary 49% 68 % 18% 31%
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Eco L2 – Sectors of the Indian Economy GDP and Employment by Sectors - Comparison
Why did the change in
employment not take
place in this sector?
Sector Contribution to GDP Contribution to Employment
Years 1973-74 2013-14 1977-78 2017-18
Primary 40% 12% 71% 44%
Secondary 11% 20% 11% 25%
Tertiary 49% 68 % 18% 31%
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Eco L2 – Sectors of the Indian Economy GDP and Employment by Sectors - Comparison
Let’s Analyse
Sector Contribution to GDP Contribution to Employment
Years 1973-74 2013-14 1977-78 2017-18
Primary 40% 12% 71% 44%
Secondary 11% 20% 11% 25%
Tertiary 49% 68 % 18% 31%
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Eco L2 – Sectors of the Indian Economy Why is the Primary Sector dominant?
Employment opportunity is not being
created in Secondary and Tertiary
Sectors.
Employment
Output in
Sector
Production
Secondary 9% 3%
Tertiary 14 % 9%
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Eco L2 – Sectors of the Indian Economy
Primary Secondary and Tertiary
• Employs more than
half of the
• Employs less than half of the population
population
• Contributes the rest to the GDP
• Contributes only
about 1/6th of the
GDP
The Challenge
There are a greater number of people in Primary Sector than necessary
The workers are underemployed
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Eco L2 – Sectors of the Indian Economy Underemployment or Disguised Unemployment
• Suppose there is farmer
called Lakshmi
• There are 5 members in
her family
• They grow crops only if
there is rain
• She owns 2 hectares of
land
• All the five members
work in it
• It requires the labour of
only three
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Eco L2 – Sectors of the Indian Economy Underemployment or Disguised Unemployment
• All of them appear to
work
• They work here because
they don’t get work
anywhere else
• No one remains idle
• Their labour effort is
divided
• No one is fully employed
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Eco L2 – Sectors of the Indian Economy Underemployment or Disguised Unemployment
• Even if two move out
the land, production will
not hamper.
• This is the situation of
underemployment or
Disguised
unemployment.
• People appear to work
but aren’t fully
employed
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Eco L2 – Sectors of the Indian Economy
Suppose there is a landlord who requires
labour of two
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Eco L2 – Sectors of the Indian Economy
Those two who are extra in Lakhsmi’s
family can move out to work in the
landlord’s farm
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Eco L2 – Sectors of the Indian Economy
Production in Lakshmi’s farm will not
vary. The family earns more income too.
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Eco L2 – Sectors of the Indian Economy
1. Write a note on the historical change in the sectors of the Developed Economies.
2. What is Tertiary Sector? Why is it becoming more and more important in recent times?
3. Primary Sector is the largest employer but the least contributor to the GDP.
Substantiate
4. What is Disguised unemployment? Explain with suitable Example.
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Eco L2 – Sectors of the Indian Economy Who else suffer from disguised unemployment?
• People in other sectors
also suffer
• They don’t get job
everyday
Painters
Plumbers
Vegetable Vendors
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Eco L2 – Sectors of the Indian Economy How to create more employment?
In Agricultural Sector Itself
1
• Suppose Lakshmi cultivates second
crop
• All the five can be fully employed
How to create employment?
• Suppose the Govt builds a Dam and
Lakshmi’s farm gets water
• All the five can be fully employed
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Eco L2 – Sectors of the Indian Economy How to create more employment?
Transportation and Trade
2
• The surplus should be transported to
nearby town/city
• The Govt. needs to construct Roads
• Employment can be generated in
Transportation and trade too
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Eco L2 – Sectors of the Indian Economy How to create more employment?
Cheap Credit
3 • Farmers like Lakshmi need many
inputs like Fertilizers, seeds,
agricultural implements etc
• They are costly
• Money lenders charge high rate of
interest
• Govt. needs to provide cheap credit
to farmers.
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Eco L2 – Sectors of the Indian Economy How to create more employment?
Small Industries
4 • Farmers grow cereals and pulses like
arhar and chipkea
• A Dal Mill can promote more
cultivation and create more
employment
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Eco L2 – Sectors of the Indian Economy How to create more employment?
Small Industries
4 • Cold Storage for potatoes and onions
can be started
• Farmers can store these crops and
sell them when the price rises
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Eco L2 – Sectors of the Indian Economy How to create more employment?
Small Industries
4 • Honey collection centres
• Food Processing Industries
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Eco L2 – Sectors of the Indian Economy How to create more employment?
Service Sector (Education)
• 60 % of the population belongs to the
age group of 5-29 year
• Only 51 % are attending educational
institutions
• They may be working as child labourers
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Eco L2 – Sectors of the Indian Economy How to create more employment?
Service Sector (Education)
5 . If these children are to attend schools,
we will require more buildings, more
teachers and other staff.
A study conducted by the erstwhile
Planning Commission (now known as
NITI Aayog) estimates that nearly 20 lakh
jobs can be created in the education
sector alone.
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Eco L2 – Sectors of the Indian Economy How to create more employment?
Service Sector (Health)
6 If we are to improve the health situation,
we need many more doctors, nurses,
health workers etc. to work in rural
areas.
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Eco L2 – Sectors of the Indian Economy How to create more employment?
Service Sector (Tourism)
• Every state has potential to increase 6
employment and income
• Tourism, IT, handicraft are some
examples
• Study by the Planning Commission
says that if tourism as a sector is
improved, every year we can give
additional employment to more than
35 lakh people.
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Eco L2 – Sectors of the Indian Economy MGNREGA
• The central government in India made a law implementing the Right to Work in about 625
districts of India.
• It is called Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA
2005).
• Under MGNREGA 2005, 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 in its duty to provide employment, it will give unemployment
allowances to the people.
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Eco L2 – Sectors of the Indian Economy Organised/ Unorganised Sectors
Case of Kanta Case of Kamal
Kanta works in an office. She attends her office
6 Kamal is Kanta’s neighbour. He is a daily wage
from 9.30 a.m. to 5.30 p.m. She gets her salary labourer in a nearby grocery shop. He goes to
regularly at the end of every month. In addition the shop at 7:30 in the morning and works till
to the salary, she also gets provident fund as per 8:00 p.m. in the evening. He gets no other
the rules laid down by the government. She also allowances apart from his wages. He is not paid
gets medical and other allowances. Kanta does for the days he does not work. He has
not go to office on Sundays. This is a paid therefore no leave or paid holidays. Nor was he
holiday. When she joined work, she was given an given any formal letter saying that he has been
appointment letter stating all the terms and employed in the shop. He can be asked to leave
conditions of work. anytime by his employer.
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Eco L2 – Sectors of the Indian Economy Differences - Organised/ Unorganised Sectors
Organised Unorganised
• There is Job Security
6 • There is no Job security
• The entrepreneurs and companies need to • Employment depends upon the whims and
follow laws such as Factories and fancies of the employer
Establishment Act, Minimum wages Act etc. • There is no fixed working hours
• Workers get facilities like paid holidays, Over • No Over Time work payment is given
Time, maternity benefits, gratuity, Provident • There are no facilities whatso ever
Fund, Pension etc • Most farmers, workers in small industries,
• Jobs in this sector are most sought after small vendors, semiskilled workers, head
load workers, rag pickers etc. are found in
this sector
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Eco L2 – Sectors of the Indian Economy Organised and Unorganised Sectors
How to protect workers in Unorganised
Sector?
• After Globalisation, most companies organised sectors have begun to function like
unorganised sectors
• Most farmers are in this sector.
• Timely supply of seeds, fertilizers, cheap credit and market for the crops can help them.
• Helping marketing the products of small industries will help workers in such industries
• Socially backward classes suffer from double disadvantage. They face social
discrimination as well as suffer from the drawbacks of unorganised sector
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Eco L2 – Sectors of the Indian Economy Public and Private Sectors
Public Sector Private Sector
6
• Major objective is profit
• Major objective is Service
• RIL, TATA Group of companies, M and M,
• Secondary objective is profit
Infosys are some examples
• BHEL, BEL, HAL are some examples
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Eco L2 – Sectors of the Indian Economy Public and Private Sectors
Why do we need Public Sector?
• There are developmental activities which requires huge investment but there is no return
for investment. Construction dams, bridges, roads are some examples.
• There are some economic activities that govt. must support. For example, supplying
electricity at subsidised prices to small industries and households.
• Taking care of the poor is the responsibility of the Govt. Hence the PDS (Public Distribution
System)
• Providing free elementary education and basic health facilities to all is the responsibility
of the Govt. So, we need Public Sector
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