Sectors of Indian Economy Three types of classification Basis of Economic Activity Primary Sector Secondary sector Tertiary Sector Basis of Organization Organised sector Unorganised sector Basis of Ownership Private Sector Public Sector

Classification of sectors on the basis of Economic Activity Economic activity- the activity concerned with production of goods and services and hence earning of income is known as economic activity. Economy is classified into three sectors on the basis of economic activity Secondary sector Primary sector Tertiary sector

Primary Sector Meaning: It includes activities carried with the help of natural resources. Most of the natural products that we get are form agriculture, therefore this sector is known as agricultural and related sector. Importance: it provides raw materials to secondary sector in the absence of which production cannot take place. Example- Agriculture, fishing, mining and forestry.

Secondary Sector Meaning: It includes activities which involves transformation of raw materials into finished goods. Generally this transformation takes place in industries, therefore, the sectors is known as manufacturing sector. Importance: It converts raw material into finished goods. In its absence the raw materail will remain unutilised. Example- manufacturing industries like car making, cloth making, sugar making etc

Tertiary Sector Meaning: Includes activities which renders services to the other two sectors. These activities don’t produce a good but are a support for the production process. Also called as service sector as it generates services. Importance: this sector is an important link between the other two sectors which would not develop in the absence of this sector. Example- Transportation, banking, communication, teaching etc.

INTERDEPENDENCE OF THE THREE SECTORS The three Sectors are interrelated. One sector needs the help of another to carry out production On the next slide we will see an example of how the sectors relate together in the production of cotton clothes, part of the fashion industry.

COTTON IN THE FASHION INDUSTRY... PRIMARY Cotton is grown and picked on a cotton farm

COTTON IN THE FASHION INDUSTRY... PRIMARY Cotton is grown and picked on a cotton farm SECONDARY Cotton is processed to cloth, which is, in turn, sewn in to clothing.

COTTON IN THE FASHION INDUSTRY... TERTIARY SECONDARY PRIMARY Cotton clothes (eg jeans, shirts etc) are sold in shops. Cotton is processed to cloth, which is, in turn, sewn in to clothing. Cotton is grown and picked on a cotton farm In the process, many other services like banking, transportation, communication, storage (godowns) etc are also needed.

Concept of Final good and Intermediate good HOW DO WE COUNT VARIOUS GOODS AND SERVICES AND KNOW THE TOTAL PRODUCTION OF EACH SECTOR? Concept of Final good and Intermediate good Final good- Final goods refer to the finished goods, which are sold in the market. Intermediate goods: All those goods, which are used by the producer for producing other goods, are known as the intermediate goods.

nuts wheat milk Sugar, oil, essence etc

Different goods produced in a sector may be measured in different units like Kg, Liters etc and hence cannot be added together. Therefore, to find the total production of a sector, the monetary value of goods and services is added up rather than adding up the actual numbers. Quantity of wheat= 50,000 Kg Price per Kg= Rs 8 So, value of wheat= 50,000 X 8= Rs 4,00,000

Precaution to be taken: While calculating the total production of a sector, the value of only the final goods is included and not the intermediate goods. The value of final goods already include the value of intermediate goods. If we also count the value of intermediate goods, then it will lead to double counting, that is, counting the value of a good more than once. Farmer Flour mill Biscuit company consumer Uses other ingredients and sells biscuit @ Rs 15/packet Sells wheat @ Rs 8/ Kg Grinds it to flour and sell it @ Rs 10/Kg Here, only the value of Biscuit (i.e Rs 15) will be counted as it already includes the value of wheat and flour.

Gross Domestic Product (GDP) The value of goods and services produced in each sector, in a particular year, is calculated and added up. The sum of the production in three sectors gives us the total production in a country, called as, Gross Domestic Product. GDP- it is the value of final goods and services produced within a country, during a particular year.

Change in the importance of Sectors Developed countries: In the initial stages of development, the primary sector is the most important sector. With time, the shift has been seen from primary to secondary to tertiary sector.

The shift between the sectors in Case of India The shift between the sectors can be seen in two terms- In terms of share of each sector in GDP (total production) The shift has been seen from primary to secondary to tertiary sector In terms of employment in each sector The primary sector continues to employ the maximum people While there has been a change in the share of three sectors in GDP, a similar shift has not taken place in employment.

GDP by Primary, Secondary and Tertiary Sectors 210000 200000 190000 180000 170000 160000 150000 140000 130000 120000 110000 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 Share of agricultural sector has decreased and that of tertiary sector has increased tremendously. Tertiary sector Secondary sector Primary sector 1973 2003

Which sector do you think has grown the most over last few years?

Share of Sectors in GDP (%) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 35 55 Tertiary sector Secondary sector Primary sector 20 20 45 25 Primary sector- produces ¼th of the GDP Secondary and tertiary sectors- produces ¾ th of GDP Share of agricultural sector in GDP has decreased and that of tertiary sector has increased.

Share of Sectors in Employment (%) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 15 22 Tertiary sector Secondary sector Primary sector 75 60 Primary sector- employs more than half of the people Secondary and tertiary sector- employs less than half of the people. NOTE: Though the share of primary sector in GDP has declined, yet it employs maximum number of people.

THINK WHY. Why does primary sector still continue to employ maximum no THINK WHY??? Why does primary sector still continue to employ maximum no. of people? ‘ In India, there has been a change in the share of 3 sectors in GDP, but similar shift has not taken place in case of employment’ Why? ‘ More than half of the workers are working in primary sector yet producing only a quarter of GDP’ Explain. ‘

Reasons: Enough job opportunities were not created in the secondary and tertiary sectors though the output of the two sectors went up. Existence of underemployment and disguised unemployment in primary sector- Primary sector employs more people in agriculture than required. Even if few people are pulled out the production will not fall. In this sector, people appear to work, but they are working less than their potential and so are not fully employed. Therefore there exists underemployment and disguised unemployment due to which the contribution of primary sector to GDP is less even though it employs more no. of people.

What can the government do in this case What can the government do in this case? How can more employment be created?

Division of sectors on the basis of working conditions at employment Organised sector The sector which carries out all activity through a system and follows govt. regulations. Unorganised sector The sector that evades most of the laws and is outside the government control

Basis Organised sector Unorganised sector Terms of employment Fixed working hours Overtime wages paid Appointment letter issued at the time of appointment Salary received on fixed date No fixed working hours No ovretime wages paid No appointment letter issued Irregularity in receiving salary Government control Registered with the government Follows rules and regulations given under various laws Outside the control of government Rules and regulations are not followed Job security Security of job No job security. People may be asked to leave anytime Social security benefits Paid leaves, sick leaves, provident fund, medical benefits etc are given No paid leaves, sick leaves, medical benefits etc are given.

How to protect the workers of unorganised sector? In Rural areas In rural areas, people like cobblers, small and marginal farmers, weavers, carpenters etc work in unorganized sector. They can be protected by: Providing loans at low rate of interest. Providing inputs at subsidized (low) rates. Giving adequate storage and transportation facility. Providing marketing outlets for sale of goods.

In urban areas In urban areas, workers in small scale industry, casual workers at construction sites, rickshaw pullers, rag pickers etc are the ones working in unorganized sector. They can be protected by: Providing loans at low rate of interest. Giving support for marketing of output. Helping in procuring raw materials.

Classification of sectors on the basis of ownership of assets Private sector Ownership of the assets and delivery of services in the hands of few individuals. Eg- Reliance, kingfisher etc Public sector Ownership of the assets and delivery of services is in the hands of the government. Eg- MTNL, Indian railways