SECTORS OF THE INDIAN

2 ECONOMY
People are engaged in various economic activities. Some of these activities are producing goods. Some
others are producing services. Generally, the economic activities performed are divided into various groups
called sectors.
Sectors of the Indian Economy
Primary Sector:
● All the economic activities which are undertaken by using or exploiting natural resources directly
are grouped into the primary sector.
● It forms the base for all other products that we subsequently make.
● It is also called agriculture and related sectors since most of the natural products are obtained from
agriculture, dairy, fishing, forestry, etc.

Secondary Sector:
● It covers activities in which natural products are changed into other forms or finished items through
ways of manufacturing.
● Since this sector gradually became associated with the different kinds of industries, it is also called the
industrial sector. For example, making clothes from cotton fibre or making sugar or gur from
sugarcane etc.

Tertiary Sector:
● It covers 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. For example, providing transport facilities to move goods from factories to shops etc.
● Since these activities generate services rather than goods, the tertiary sector is also called as the
Service sector.

Comparing the three Sectors:

The various production activities in the primary, secondary and tertiary sectors produce a very large number
of goods and services. Also, a large number of people work in these sectors. Therefore, it is important to see
SECTORS OF THE INDIAN ECONOMY

how much goods and services are produced and how many people work in each sector.
While measuring the total production:
● Monetary value of the final goods and services are considered, to make the estimates.
⮚ The value of final goods includes the value of all the intermediate goods that are used in making the
final good. For example, the value of wheat used is already accounted for in the final cost of a biscuit.
● The value of final goods and services produced in each sector during a particular year provides the
total production which is estimated by the Gross Domestic Product (GDP).
● GDP is the value of all final goods and services produced within a country during a particular year.

Historical change in the sectors:

● At the initial stages of development, the primary sector has been the most important sector of

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 economic activity. Most people were employed in this sector.
● With the change in farming methods, the agriculture sector began to prosper. Moreover, with the
introduction of new manufacturing methods, factories were set up and people shifted to the
Industrial Sector.
● People from farms, now started working in factories in large numbers, and this sector now assumed
importance.
● In the past 100 years, a further shift from the secondary sector to the service sector has now taken
place.
● Today in terms of contribution to production and employment, the service sector plays a vital role in
most developed economies.

Primary, Secondary and Tertiary Sectors in India:

The graph below shows the production of goods and services in three sectors. It is clear from the graph that
the production of the tertiary sector has significantly risen as compared to the primary and the secondary
sector.

SECTORS OF THE INDIAN ECONOMY

Graph 1: GDP by Primary, Secondary and Tertiary Sectors

Rising Importance of the Tertiary Sector in Production:

The tertiary sector has emerged as the largest producing sector in India replacing the primary sector, due to
the following reasons:
● Development of support services such as transport, trade, storage, etc.
● Increased demands for more services such as eating out, tourism etc. with rising income levels.
● Basic services like schools, hospitals, policing etc. provided by the government.
However, the rise in the service sector is not uniform with high skill-oriented services registering a high
growth as compared to sustenance levels of other services like small shop keeping.

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 Disproportionate distribution of labour across sectors:
● More than half of the workers in the country are working in the primary sector, mainly in agriculture,
producing only about one sixth of the GDP. In contrast the secondary and tertiary sectors produce the
rest of the produce whereas they employ less people.
● Meaning, workers in the agricultural sector are underemployed and are disproportionately in numbers,
when compared to productivity, meaning that this hidden underemployment is in effect “disguised
unemployment”.

Methods to create more employment:

● Providing affordable credit facili es to agricultural dependents to allow them to modernize
their techniques.
● Infrastructural development to improve health and educa on scenarios, to allow people to
undertake alterna ve occupa ons.
● Providing transporta on facili es to allow good marke ng of agricultural produce to far off
marketplaces.
● Iden fying alternate services and industrial opportuni es in semi-rural areas.

Division of Sectors as Organised and Unorganised:

● Organised Sector: It is characterized by regular terms of employment, mandatory registration with the
government and mandatory adherence to laws and rules like Minimum Wages Act etc.
● Unorganised sector: It is characterized by lack of government control, non-adherence to rules and
regulations and unsecured employment.
⮚ Many organized sector firms, trespass into unorganized setup, as a strategy to avoid certain legal
frameworks and to avoid taxes etc.
⮚ Job loss in the organised sector is also pushing many workers to the low paying unorganised
sector.
⮚ Many workers from the vulnerable sections like the Scheduled Castes, Scheduled Tribes etc, find
SECTORS OF THE INDIAN ECONOMY

themselves working in the unorganised sector.

Issues with workers in the Unorganised Sector:

It is common to find many organised sector enterprises in the unorganised sector. They adopt such
strategies to evade taxes and refuse to follow laws that protect labourers. As a result, a large number of
workers are forced to enter the unorganised sector jobs and face various issues such as:
● They are often exploited and not paid a fair wage.
● Their earnings are low and not regular.
● Their jobs are not secure and have no other benefits.
● Social discrimination faced by the vulnerable groups such as Scheduled castes, tribes and backward
communities in the unorganised sector.

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Thus, protection and support to the unorganised sector workers is necessary for both economic and social
development.

Sectors in terms of Ownership

Public and Private Sectors:
● Public sector is characterized by government ownership of most of the assets and provides all the
services. For example, Railways, post offices, etc.
● On the contrary, Private sector is characterized by private ownership of assets and delivery of
services by private individuals or companies. For example, Tata Iron and Steel Company Limited
(TISCO) or Reliance Industries Limited (RIL) etc.
● A general analysis in Indian scenario is as follows:
⮚ Goods and services in the private sector are provided with a profit motive, hence this sector does
not provide certain essential services due to high costs and operational difficulties.
⮚ Government provides certain services like construction of roads, bridges, railways, harbours,
generating electricity, providing irrigation through dams etc. to make them affordable and
accessible to everyone.
⮚ Government has to support the private sector to induce continued production in some sectors. For
example: bearing a part of the cost of electricity generation to make it affordable for the consumers.
⮚ The government must spend on activities consisting of its primary responsibilities like providing
health and education facilities for all.

Interesting points

● Right to Work was implemented by Mahatma Gandhi Na onal Rural Employment Guarantee Act 2005
(MGNREGA 2005).

SECTORS OF THE INDIAN ECONOMY