CBSE Class 10 Social Science Sectors of the Indian Economy Notes Set 05

Three sectors of economic activity

Economic activities are grouped by their nature into three sectors.

1. Primary sector: activities that produce goods by directly using natural resources, such as agriculture, dairy, fishing and mining. It is also called the agriculture and related sector.
2. Secondary sector: activities in which natural products are turned into other forms by manufacturing, such as making cloth from cotton or sugar from sugarcane. It is also called the industrial sector.
3. Tertiary sector: activities that help the primary and secondary sectors develop and that produce services rather than goods, for example transport, trade, banking, insurance and communication. It is also called the service sector.

The three sectors depend on each other. Farmers need tractors and fertilisers from the secondary sector, factories need raw materials from farms and mines, and both need transport and banking from the tertiary sector.

Measuring growth: GDP

Gross Domestic Product (GDP) is the value of all final goods and services produced within a country in a given year. Only final goods are counted, not intermediate goods, because the value of intermediate goods is already included in the price of the final good. Counting them again would be double counting. In India, GDP is measured by a central government ministry, which collects data from all the states and Union Territories.

Over time, as development takes place, the share of the primary sector in GDP falls and that of secondary and then tertiary sectors rises. In India, the tertiary sector is now the largest producer. However, employment has not moved at the same rate: a majority of workers are still engaged in agriculture, so the sector that produces the largest share of GDP is not the one that employs the most people.

Underemployment and creating jobs

Underemployment, or disguised unemployment, occurs when people appear to be working but are producing less than their potential. For example, on a small farm with five members working when two would be enough, three are not needed. Unemployment is different: a person who is able and willing to work cannot find a job.

Employment can be raised by 1. providing irrigation and credit in rural areas, 2. promoting labour-intensive industries and services in semi-urban areas, and 3. public programmes. The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 guarantees 100 days of paid employment every year to every rural household in which adult members volunteer for unskilled manual work. If work is not provided, the government must pay an unemployment allowance, which is why it is called the Right to Work.

Organised and unorganised sectors

The organised sector covers enterprises where terms of employment are regular and workers have assured work. These are registered with the government and follow rules such as the Factories Act and Minimum Wages Act. Workers get fixed hours, overtime pay, paid leave, provident fund, gratuity and medical benefits.

The unorganised sector consists of small and scattered units that are largely outside government control. Rules exist but are not followed. Jobs are low-paid and irregular, with no overtime, paid leave or protection from sudden dismissal. Most Indian workers are in this sector, so they need protection and support, particularly small farmers, casual labourers and street vendors.

Public and private sectors

In the public sector the government owns most of the assets and provides services, for example Indian Railways and the Post Office. Its main aim is public welfare. In the private sector assets are owned by individuals or companies and the main aim is profit, for example Tata Steel and Reliance. The government has to supply services such as roads, health care and education that private firms may not provide at affordable prices.

Worked examples

Example 1. Classify cotton farming, a textile mill and a cloth shop.
Answer: Cotton farming is primary, the mill is secondary and the cloth shop is tertiary. Each activity depends on the previous one.

Example 2. A farmer sells wheat worth ₹ 2,000 to a flour mill, which sells flour worth ₹ 3,000 to a biscuit factory, which sells biscuits worth ₹ 4,500 to consumers. What is added to GDP?
Answer: Only the final product is counted, so ₹ 4,500 is added to GDP. Adding ₹ 2,000 and ₹ 3,000 also would be double counting.

Example 3. Why is MGNREGA 2005 called the Right to Work?
Answer: It legally guarantees 100 days of employment per year to rural households that ask for work. If the government fails to provide it, an unemployment allowance must be paid.

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