CBSE Class 10 Social Science Sectors of the Indian Economy Notes Set 06

Classifying economic activities

Economic activities are classified into three sectors according to what they do.

1. Primary (agriculture) sector: produces goods by directly using natural resources, such as farming, dairy, fishing, forestry and mining.

2. Secondary (industrial) sector: turns natural products into other forms through manufacturing, such as cotton into cloth or sugarcane into sugar.

3. Tertiary (service) sector: supports the primary and secondary sectors and produces services rather than goods, for example transport, trade, banking, communication and teaching.

The sectors are linked: a farmer needs tractors from industry, transport to take crops to market and credit from banks.

Measuring the sectors

The value of final goods and services produced in each sector is added up to get the Gross Domestic Product (GDP), the total value of all final goods and services produced within a country in a year. Only final goods are counted, because the value of intermediate goods is already included in the final goods. In India, GDP is measured by a central government ministry that collects data from all states and union territories.

In the course of development, the primary sector usually gives way first to the secondary sector, and then the tertiary sector becomes most important. In India, the tertiary sector is now the largest producer in GDP. The primary sector is still the largest employer, although it produces only a small share of GDP.

Why the tertiary sector has grown

1. Basic services such as hospitals, schools, post, police, transport and banks are needed in any country.

2. Development of agriculture and industry raises demand for transport, trade and storage.

3. As incomes rise, people spend more on tourism, shopping, private hospitals and schools.

4. New services, based on information and communication technology, have become important.

Employment concerns

Many workers in agriculture work less than they could; the same work could be done by fewer people. This is underemployment or disguised unemployment, and these workers are hidden when compared with the unemployed, who want work and cannot find any. Moving surplus workers to other work, creating irrigation facilities, and starting industries in semi-rural areas can raise employment.

The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 guarantees 100 days of paid employment in a year to every rural household whose adult members volunteer for unskilled manual work. If work is not provided, the government must pay an unemployment allowance. It is therefore called a Right to Work.

Organised and unorganised sectors

The organised sector has regular terms of employment, assured work, fixed hours, overtime pay, paid leave, provident fund, gratuity and medical benefits, and is registered and follows laws such as the Factories Act and Minimum Wages Act. The unorganised sector has small, scattered units, outside government control, with low wages, no overtime, paid leave or job security. Most workers in India, including farmers, casual labourers and street vendors, are in the unorganised sector and need protection and support.

Public and private sectors

In the public sector, the government owns most assets and provides services, such as Indian Railways and the post office. Its aim is public welfare, including services that private firms will not offer at low cost, such as roads, schools and irrigation. In the private sector, individuals or companies own assets, and the aim is profit.

Worked examples

Example 1. In a year, the primary sector produced goods worth ₹800 crore, the secondary ₹1,200 crore and the tertiary ₹2,000 crore. Find the GDP and share of each sector. GDP = 800 + 1,200 + 2,000 = ₹4,000 crore. Shares are 800 ÷ 4,000 = 20 per cent, 1,200 ÷ 4,000 = 30 per cent and 2,000 ÷ 4,000 = 50 per cent.

Example 2. Why are only final goods counted in GDP? Intermediate goods such as cotton or wheat used to make cloth or biscuits are already part of the value of the final product. Counting them again would overstate production.

Example 3. Distinguish disguised unemployment from unemployment. In disguised unemployment, people appear busy but their work adds little to output and could be done by fewer people. An unemployed person is willing and able to work but cannot find any job.

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