CBSE Class 10 Social Science Sectors Of Indian Economy Notes Set 03

These CBSE Class 10 Economics notes for Chapter 2 Sectors of the Indian Economy cover the primary, secondary and tertiary sectors and how they depend on one another, intermediate versus final goods and GDP, the historical shift between sectors in India, employment, unemployment and disguised unemployment, MGNREGA, the organised and unorganised sectors, and the public and private sectors, with a glossary at the end.

The Three Sectors of the Economy

Interdependency of the Sectors

Although economic activities are classified into separate sectors, all these activities are closely interrelated, so the sectors are highly interdependent. For example, chemical fertilisers are produced in the secondary sector but used (consumed) in the primary sector. The primary sector supplies food and raw materials to the secondary sector, and in return receives machines, equipment and other inputs from it; the primary sector also supplies food to the tertiary sector, and in return receives basic services such as transportation and banking.

Intermediate and Final Goods

Comparing the Three Sectors

To assess each sector's performance, we add up the goods and services it produces: Goods produced in the Primary Sector + Goods produced in the Secondary Sector + Goods produced in the Tertiary Sector = GDP of the country. But this simple approach involves a lot of double counting. For example, a farmer produces one tonne of wheat and sells it to a flour mill for Rs 100 — an intermediate good for the mill. The mill converts it into flour and sells it to a baker for Rs 150; the mill treats flour as its own final product, but for the baker it is an intermediate good. The baker sells bread to a shopkeeper for Rs 200, who sells it to a customer for Rs 250. Only the value of the final good (the bread, which reaches the consumer) should be counted, since its price of Rs 250 already includes the value of all the intermediate goods — the wheat and the flour — used in making it.

Gross Domestic Product (GDP)

GDP is the market value of all final goods and services produced within the domestic territory of a country during one year. India's domestic territory includes both resident and non-resident producers — for instance, multinational companies and international banks operating within the country — and GDP includes the market value of final goods and services produced by all such producers. Measuring GDP is a huge undertaking, carried out by the Ministry of Statistics and Programme Implementation, Government of India, which collects information on the total volume of goods and services and their prices, and then estimates GDP from this data.

India's nominal GDP (GDP at current prices) for 2022-23 was estimated at Rs 273.08 lakh crore, against a provisional estimate of Rs 236.65 lakh crore for 2021-22 — nominal GDP growth of about 15.4% in 2022-23, compared to 19.5% in 2021-22. Negative growth refers to a decline in a company's sales or earnings, or in an economy's GDP, over a quarter; it is often accompanied by declining wage growth and a contraction in the money supply, and economists generally treat it as a warning sign of a possible recession or depression.

The Historical Shift Between Sectors

For a long period, most of the population was engaged in the primary sector; as new manufacturing methods emerged and factories expanded, people who had worked in agriculture increasingly moved into the industrial (secondary) sector, which became the most important in total production and employment. In more recent decades, developed countries have seen a further shift from the secondary to the tertiary sector, which has now become the most important sector in terms of both production and employment, with most working people employed in services.

In India, over the forty years between 1973-74 and 2013-14, production grew in all three sectors, but grew the most in the tertiary sector; as a result, by 2013-14, the tertiary sector had overtaken the primary sector to become India's largest producing sector.

The Rising Importance of the Tertiary Sector

Basic services: every developing country needs basic services such as hospitals, educational institutions, postal and telegraph services, and police stations, and providing these is the state's responsibility; as more people are employed to provide them, the tertiary sector's share of GDP rises.
Development of transport and communication: growth in agriculture and industry itself drives growth in supporting services such as transport, communication and trade — all tertiary sector activities.
Rising income, rising demand for services: as per capita income rises, so do people's expectations and demands, leading to greater use of services such as tourism and restaurants.
New services: modernisation and globalisation have made many new information- and communication-technology-based services increasingly important.

Where Are Most People Employed?

The primary sector's share of GDP has fallen sharply, from about 40% to around 15%, while the secondary sector's contribution has risen from about 10% to around 20%. Even so, the primary sector remained the largest employer as recently as 2017-18, while the tertiary sector's share of employment rose from about 15% to around 25%. The secondary and tertiary sectors together have failed to create enough jobs to match this shift in output: industrial output (goods production) rose about eight-fold over the period, but employment rose only about two-and-a-half-fold. More than half of India's workers still work in the primary sector, mainly in agriculture, yet produce only about a quarter of GDP.

Employment, Unemployment and Disguised Unemployment

Employment refers to having a paid job, earning money and contributing to the nation's GDP. Unemployment refers to a situation where a person actively seeking work is unable to find it, and so makes no contribution to GDP. According to CMIE data, India's unemployment rate fell to a four-month low of 7.14% in January 2023, having been 8.3% in December 2022, 8% in November 2022, and 6.43% in September 2022.

Underemployment, or disguised unemployment, describes a situation where people are working, but all are made to work below their actual potential. Unlike open unemployment, where a person clearly has no job, disguised unemployment is hidden — for example, casual workers in urban areas who search daily for work. Consider a small farmer with about 3 hectares of unirrigated land, where all seven members of the family work the same plot throughout the year, simply because they have nowhere else to go for work: everyone is working, but each person's actual effort is divided among them, so no one is genuinely fully employed.

How to Create More Employment

Improving the agriculture sector: through greater government spending, bank loans for irrigation facilities, and construction of dams and canals, creating more employment within agriculture and reducing underemployment.
Cheap credit facilities: since most farmers rely on informal, often costly, sources of credit, government should encourage commercial banks to provide farm loans at cheaper rates.
Provision of basic facilities: greater investment in roads, transport, banking and markets creates further employment opportunities.
Promotion of local industries: particularly cottage and small-scale industries in semi-rural areas, which employ large numbers of people.
Improving education and health: many Indian villages still lack basic education and health facilities; it is estimated that nearly 20 lakh jobs could be created in the education sector alone, alongside the need for more doctors, nurses and health workers in rural areas.
Other new services: tourism, regional craft industries, and new services such as IT need proper planning and government support.

MGNREGA (2005)

The Mahatma Gandhi National Rural Employment Guarantee Act aims to enhance the livelihood security of rural households by guaranteeing at least 100 days of paid employment in a financial year to those who seek it. Its features include: 100 days of guaranteed employment each year; an unemployment allowance if employment cannot be provided; it reflects the "right to work" principle; it enforces equal wages for equal work; it is targeted especially at SC/ST households and poor women; and at least one-third of its beneficiaries are women.

Sectors by Working Conditions: Organised and Unorganised

Organised sector: covers enterprises or workplaces with regular terms of employment, giving workers assured work; these are registered with the government and must follow laws such as the Factories Act, the Minimum Wages Act, the Payment of Gratuity Act, and the Shop and Establishment Act. Its advantages include job security, payment for a fixed number of hours (with overtime pay beyond that), benefits such as paid leave and provident fund, and a pension after retirement.

Unorganised sector: not registered with the government, and characterised by small, scattered units largely outside government regulation. Its disadvantages include low wages, no provision for overtime, paid leave, holidays or sick leave, a high degree of job insecurity (workers can be let go without reason), and a high degree of exploitation; it includes a large number of people in small jobs, landless labourers and casual workers.

Protecting unorganised sector workers matters because of low and unfixed wages, job insecurity (for example, a construction labourer is left without work once a project is complete, with no guarantee of future work), and the lack of medical/health security, which leaves workers unprotected if an accident occurs on the job. Possible measures include developing alternative sources of employment outside agriculture on a long-term basis; organising public works programmes so that rural workers, who often find work only during sowing and harvesting, have employment year-round; and strengthening social security for these workers.

Sectors by Ownership: Public and Private

Private sector: owned, controlled and managed by an individual or a group of individuals, driven by a profit motive — e.g. Hindustan Unilever, Tata Steel, Bajaj Auto.
Public sector: owned, controlled and managed by the government, driven by the motive of social welfare and providing for people's basic needs — e.g. Indian Railways, BHEL, Sindri Fertiliser Limited.

The Role of the Public Sector

Infrastructure development: transport, power, communication and basic industries, whose costs are sometimes called "social overhead costs".
Development of backward areas: the government often has to undertake industrial development in such areas itself.
Basic facilities: running schools and providing education is treated as a government responsibility.
Other problems: issues such as malnutrition, a high infant mortality rate and unsafe drinking water need focused attention, and can usually only be addressed with government involvement.

The Public Sector's Contribution to National Development

It provides essential services at a reasonable cost, where the private sector often fails to do so; it is often the only sector able to fund the setting up of heavy industries, which require very large capital; its purpose is people's benefit rather than profit; it bears some costs to benefit the public, particularly the poor (for example, selling wheat, kerosene and oil at prices lower than the open market); and it provides education and healthcare either free of cost or at very nominal prices.

Glossary

Economic Activities: activities related to the production and sale of goods and services — e.g. banking, farming, cultivation, production.
Sectors: the grouping of economic activities according to a shared criterion, to help analyse activity within a particular group.
Primary Sector: also called the agriculture sector; includes activities closely tied to the natural environment, providing raw materials for other sectors — e.g. agriculture, poultry.
Secondary Sector: also called the manufacturing sector; processes raw materials from the primary sector using machines — e.g. manufacturing cloth from cotton, sugar from sugarcane.
Tertiary Sector: also called the services sector; does not produce goods, but supports the development of the primary and secondary sectors — e.g. banking, insurance, IT services.
Intermediate Goods: goods used up in producing final goods and services; not included in GDP — e.g. flour, cotton.
Final Goods: goods used for final consumption or capital formation; included in GDP — e.g. television, bread.
Double Counting: counting the value of a product more than once, usually by mistakenly including intermediate goods when calculating GDP.
Gross Domestic Product: the market value of the final goods and services produced within a country's domestic territory during one year.
Employment: having a paid job, earning money and contributing to the nation's GDP.
Unemployment: a situation where a person actively seeking work is unable to find it, making no contribution to GDP.
Disguised Unemployment: a situation where people are working, but all are made to work below their actual potential.
Public Sector: owned, controlled and managed by the government, with a social welfare motive.
Private Sector: owned, controlled and managed by an individual or group of individuals, with a profit motive.
Organised Sector: enterprises or workplaces with regular terms of employment, giving workers assured work.
Unorganised Sector: enterprises not registered with the government, characterised by small and scattered units largely outside government regulation.
MGNREGA (2005): an Act aimed at enhancing the livelihood security of rural households by guaranteeing a minimum of 100 days of paid employment per financial year.