Sectors of Indian Economy

Primary Sector: When the economic activity depends mainly on exploitation of natural resources then that activity comes under the primary sector. Agriculture and agriculture related activities are the primary sectors of economy. This sector forms the base of all other products which we subsequently make. Hence, this sector is called primary sector.

Secondary Sector: When the main activity involves manufacturing then it is the secondary sector. All industrial production where physical goods are produced come under the secondary sector.

Tertiary Sector: When the activity involves providing intangible goods like services then this is part of the tertiary sector. Financial services, management consultancy, telephony and IT are good examples of services sector.


Evolution of an Economy from Primary Sector Based to Tertiary Sector:

Stage 1: During early civilization all economic activity involved agriculture and related activities. At this stage, primary sector was the most important sector.

Stage 2: When food production became surplus people's need for other products increased. This was the phase when some other occupations emerged on the scene, e.g. craftsperson and trading. Still, primary sector was the most important sector.

Stage 3: The growth of secondary sector spread its influence during industrial revolution in nineteenth century. Mass production resulted in development of secondary sector or industrial sector. At this stage, secondary sector became the most important sector.

Stage 4: After growth of economic activity a support system was the need to facilitate the industrial activity. Certain sectors like transport and finance play an important role in supporting the industrial activity. Moreover, more shops were needed to provide goods in people's neighbourhood. Ultimately, other services like tuition, administrative support developed. At this stage, tertiary sector became the most important. This situation can be seen in developed economies.

Interdependency of Sectors:

To understand this interdependency, let us take an example of a cold drink. A cold drink contains water, sugar and artificial flavour. Suppose if there is no sugarcane production then procuring sugar will become difficult and costly for the cold drink manufacturer. Now to transport sugarcane to sugar mills and sugar to the cold drink plant needs the services of a transporter. A person or system of persons is required to maintain and monitor all these movements of goods from farm to factory to shop in different locations. That is where role of administrative staffs comes. Let us go back to the farmer. He also needs fertilizers and seeds which are processed in some factory and need to be delivered to his doorstep by some means of transportation. Moreover, at every step of these activities we require the proper monetary and banking system. So, in a nutshell, this describes how interrelated all sectors of an economy are.


Growth and Status of Different Sectors in India

rupee value of three sectors bar graph

Closely observe the given graphs. The first graph shows the rupee-wise turnover of various sectors in over 40 years, i.e. 1971-72 and 2011-12. The second graph shows the share of three sectors in the GDP during these 40 years and last graph shows share in providing employment.

The first graph shows a massive increase in turnover for all these sectors during 40 years, which shows the way our economy grew.

three sectors share in GDP bar graph

The second graph shows that share of agriculture decreased substantially and that of industry remained static and share of services grew. What is remarkable is the fact that growth of share of services sector was phenomenal from 35% to 58%.

three sectors share in employment bar graph

But the third graph paints a distressing picture. The share in providing employment was not in tune with the share in GDP. The agriculture provided employment to 75% workers and this decreased to 49% in 2011-12, which is not as big a drop as agriculture’s drop in GDP contribution. On the other hand, the growth in employment provided by remaining sectors was substantially low.

The meaning of this finding is as follows:

Other Classifications of Economy

Organized Sector: The sector which carries out all activity through a system and follows the law of the land is called organized sector. Moreover, labour rights are given due respect and wages are as per the norms of the country and those of the industry. Labour working in organized sector gets the benefit of social security net as framed by the Government. Certain benefits like provident fund, leave entitlement, medical benefits and insurance are provided to workers in the organized sector.

These security provisions are necessary to provide source of sustenance in case of disability or death of the main breadwinner of the family. Otherwise the dependents will face a bleak future.

Unorganized Sector: The sector which evades most of the laws and doesn’t follow the system comes under unorganized sector. Small shopkeepers, some small scale manufacturing units keep all their attention on profit-making and ignore their workers’ basic rights. Workers don’t get adequate salary and other benefits like leave, health benefits and insurance are beyond the imagination of people working in unorganized sectors.

Public Sector: Companies which are run and financed by the Government comprise the public sector. After independence, India was a very poor country. India needed huge amount of money to set up manufacturing plants for basic items like iron and steel, aluminium, fertilizers and cements. Additionally, infrastructure like roads, railways, ports and airports also require huge investment. In those days, Indian entrepreneur was not cash rich so government had to start creating big public sector enterprises like SAIL (Steel Authority of India Limited), ONGC(Oil & Natural Gas Commission), etc.

Private Sector: Companies which are run and financed by private people comprise the private sector. Companies like Hero Honda, Tata, etc. are from private sectors.

Unemployment

You have seen that employment generation in secondary and tertiary sectors is not in tune with growth of these sector's share in GDP. Let us try to find possible reasons for this. People who are still engaged in primary sector are doing so because of two possible reasons.

Hidden Unemployment: Let us assume a hypothetical situation. There is a shop in a village which is generating enough income to sustain a family of husband, wife and their four sons. In due course of time, the four sons grow to become adults and the old shopkeeper dies. Now, all the four brothers are working in the same shop but the shop is not generating enough revenue to sustain the families of four brothers. In spite of this, all the four brothers continue to work in shop because they are unable to find alternate opportunity. The shop is just big enough to sustain a family of one brother and there is no scope of business expansion in the small village. This is a good example of hidden unemployment. This is a situation when people appear to be employed but are in fact unemployed because of lack of opportunity. This problem is prevalent in rural areas where too many people continue to work on a small patch of land because they have no other gainful employment.

Government Aided Schemes to Fight Unemployment

Government, from time to time, announces and implements various employment schemes to fight unemployment or hidden employment to help the weaker section of society. Schemes; like NREG (National Rural Employment Guarantee) is the latest announced by the UPA government in 2004. Now it is known as MNREGA (Mahatma Gandhi National Rural Employment Guarantee). This programme guarantees a minimum of 100 days of employment to at least one person from every rural household. This is part of government’s effort to ensure the ‘Right to Work’ to the rural poor citizen.



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