Chapter - 2 Sectors of the Indian Economy

Chapter - 2 Sectors of the Indian Economy 

The Indian economy is divided into different sectors based on economic activities and the nature of ownership.

1. Sectors Based on Economic Activities

A. Primary Sector (Agriculture & Related Activities)

• Involves extraction of natural resources.
• Includes farming, fishing, forestry, mining, and animal husbandry.
• Example: A farmer growing wheat, a fisherman catching fish.

Importance:

• Provides raw materials for industries.
• Largest employment sector in India.

B. Secondary Sector (Manufacturing & Industry)

• Involves processing raw materials into finished goods.
• Includes factories, industries, construction, and power generation.
• Example: A textile mill making clothes from cotton, a car factory producing vehicles.

Importance:

• Increases economic growth and industrial development.
• Generates employment in factories and construction.

C. Tertiary Sector (Services & Trade)

• Involves providing services rather than producing goods.
• Includes transport, banking, insurance, education, healthcare, IT, and tourism.
• Example: A doctor treating patients, a teacher educating students, a bank providing loans.

Importance:

• Fastest-growing sector in India.
• Supports primary and secondary sectors.

What are Intermediate Goods?

• Intermediate goods are goods that are used in the production of final goods and services.
• They are not directly consumed by consumers but are used as raw materials or components in the production process.

Example:

• Sugar used in making biscuits.
• Cotton used in making clothes.
• Tyres used in car manufacturing.

Characteristics of Intermediate Goods

• Not Ready for Final Use – They need further processing.
• Used in Production – They are used to make final goods.
• Not Counted in GDP – Only final goods are counted to avoid double counting in GDP calculation.

What is GDP?

• Gross Domestic Product (GDP) is the total value of all final goods and services produced within a country in a given year.
• It is an important measure of a country's economic growth and development.

Historical Changes in Sectors of the Indian Economy 

The contribution of the Primary, Secondary, and Tertiary sectors to India's GDP and employment has changed over time. These changes are influenced by economic development, industrialization, and government policies.

1. Primary Sector (Agriculture & Related Activities)

Before Independence (Pre-1947):

• Main sector of employment (about 75% of people worked in agriculture).
• Low productivity due to traditional farming methods and lack of technology.
• British policies harmed Indian agriculture (focus on cash crops like indigo and cotton for British industries).

After Independence (Post-1947):

• Green Revolution (1960s) – Increased food production using high-yield seeds, fertilizers, and irrigation.
• Agriculture’s share in GDP declined, but it still employs a large part of the population (~45% today).

2. Secondary Sector (Manufacturing & Industry)

Before Independence (Pre-1947):

• Small-scale industries and handicrafts were common.
• British policies destroyed Indian industries (e.g., decline of textile industries due to British imports).

After Independence (Post-1947):

• 1950s-1980s: Government focused on industrialization (setting up steel plants, power plants, and heavy industries).
• 1991 Economic Reforms – Privatization and globalization led to a boom in the manufacturing sector.
• More factories and industrial jobs were created.

3. Tertiary Sector (Services & Trade)

Before Independence (Pre-1947):

• Services were limited to trade, transport, banking, and administration.

After Independence (Post-1947):

• Growth in transport, banking, education, healthcare, and IT.
• Since the 1990s (Post-Liberalization) – India became a global leader in IT & software services (BPOs, call centers, online businesses).
• Service sector became the largest contributor to GDP (~55-60%), creating many jobs.

Current Trend:

• India’s economy is now service-driven, with IT, banking, healthcare, and tourism growing rapidly.

Rising Importance of the Growth of the Tertiary Sector

1. Increased Demand for Services

• As incomes rise, people spend more on services like education, healthcare, banking, tourism, and entertainment.
• Example: More people now visit private hospitals and schools than before.

2. Growth of Information Technology (IT) and Communication

• India has become a global leader in IT services, software development, and BPOs (Business Process Outsourcing).
• Example: Companies like TCS, Infosys, and Wipro provide IT services worldwide.

3. Industrial and Agricultural Growth

• Industries and farms need transport, storage, banking, and insurance.
• Example: Farmers now use banking services for loans and crop insurance.

4. Urbanization and Modernization

• More people are moving to cities, increasing demand for housing, retail, transport, and entertainment.
• Example: The rise of shopping malls, restaurants, and online businesses.

5. Government Policies and Globalization

• Economic reforms (1991 liberalization) allowed foreign companies to invest in India, boosting banking, retail, and telecommunications.
• Example: Reliance Jio revolutionized mobile internet services.

Where Are the Most People Employed in India? 

Even though the tertiary sector contributes the most to GDP, the majority of Indians are still employed in the primary sector (agriculture and related activities).

• Most people (~45%) still work in the primary sector (agriculture) even though it contributes less to GDP.
• The tertiary sector dominates the economy in terms of GDP, but employs only 30% of workers.
• The secondary sector provides around 25% of employment, mostly in construction and industries.

Why Do Most People Still Work in Agriculture?

• Lack of Industrial & Service Jobs – Many rural people do not have access to factory or service jobs.
• Low Skill Levels – Many workers are unskilled and can only do farming or daily wage labor.
• Traditional Dependency – Many families have been engaged in agriculture for generations.
• Disguised Unemployment (underemployed) – More people work in farming than necessary, leading to hidden unemployment.

While most Indians are still employed in agriculture (primary sector), the future of employment lies in the industrial and service sectors, which provide higher income and better opportunities.

Ways to Create More Employment

1. Improving Agriculture 

• Provide modern equipment, irrigation, and better seeds to increase productivity.
• Encourage agro-based industries (like food processing, dairy, and cold storage) to create jobs.
• Example: Setting up food-processing units in villages to generate local employment.

2. Expanding Small-Scale Industries

• Promote handicrafts, pottery, and textile industries in rural areas.
• Provide low-interest loans and training to small business owners.
• Example: Khadi and village industries create self-employment.

3. Boosting the Manufacturing Sector 

• Programs like "Make in India" encourage companies to set up factories.
• More factories = more jobs in construction, engineering, and production.
• Example: Automobile and electronics manufacturing create thousands of jobs.

4. Promoting the Service Sector 

• Expand banking, transport, tourism, education, and healthcare to employ more people.
• Encourage BPO (Call Centers) and IT companies in smaller towns.
• Example: IT hubs like Bengaluru and Hyderabad generate thousands of jobs.

5. Developing Infrastructure & Construction 

• Building roads, bridges, railways, and housing creates employment for laborers, engineers, and suppliers.
• Government programs like "Bharatmala" and "Smart Cities" help generate jobs.

6. Encouraging Self-Employment & Startups 💡

• Provide loans and skill training to encourage entrepreneurship.
• Example: Government schemes like Mudra Yojana help small businesses grow.

7. Government Employment Programs 

• MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) provides 100 days of guaranteed work in villages. Under - Right to work.
• Other schemes like Skill India, Startup India, and PMEGP (Prime Minister’s Employment Generation Programme) create jobs.

Sectors Based on Employment

A. Organized Sector

• Well-defined rules & regulations (government or private jobs).
• Fixed salary, job security, benefits, paid leave (PF, medical leave).
• Example: Government offices, banks, IT companies.
• Safe working environment 
• Over time paid by employer.

B. Unorganized Sector

• No job security, low wages, no fixed working hours.
• don't have well-define rules &regulations
• Small and scattered.
• don't registered by govt.0
• Example: Daily wage laborers, street vendors, domestic workers.
• Government initiatives like MGNREGA (2005) provide employment security in rural areas.

Ways to Protect the Unorganised Sector

1. Government Laws & Regulations 

• Implement and enforce minimum wage laws to prevent exploitation.
• Introduce fixed working hours and better working conditions.
• Provide legal protection against unfair dismissal.

Example: The Minimum Wages Act ensures workers are paid fairly.

2. Social Security Schemes  

• Provide pension, health insurance, and maternity benefits.
• Offer unemployment benefits for workers during job loss.

Example:

Pradhan Mantri Shram Yogi Maandhan (PMSYM) – A pension scheme for unorganised workers.

Ayushman Bharat Yojana – Free healthcare for low-income workers.

3. Skill Development & Education 

• Provide vocational training to improve workers' skills.
• Offer financial literacy programs so workers can manage their earnings better.
• Example: Skill India Mission trains workers for better jobs.

4. Promoting Small-Scale Industries & Self-Employment 

• Support small businesses with low-interest loans.
• Provide market access for rural artisans and handicraft workers.
• Encourage SHGs (Self Help Groups) to help women workers earn a stable income.
• Example: MUDRA Yojana gives loans to small businesses and street vendors.

5. Strengthening Trade Unions & Worker Rights 

Encourage workers to form unions for collective bargaining.

Ensure grievance redressal mechanisms for complaints against unfair treatment.

Sectors Based on Ownership

A. Public Sector

• Owned and operated by the government for public welfare.
• Example: Indian Railways, BSNL, ONGC.

B. Private Sector

• Owned and operated by individuals or companies for profit.
• Example: TCS, Reliance, Infosys, Tata Motors.

Interdependence of Sectors

• All three sectors are interconnected:
• Farmers (Primary) produce wheat → Flour mills (Secondary) make bread → Shops (Tertiary) sell the bread.

1. Public Sector (Government-Owned)

Motive:

• Welfare of the people rather than profit.
• Provide essential services like education, healthcare, and transport.
• Reduce economic inequality by ensuring access to services for all.

Examples:

• Indian Railways (provides affordable transport).
• LIC (Life Insurance Corporation of India) (government-run insurance).
• BHEL (Bharat Heavy Electricals Limited) (produces electricity & machinery).

2. Private Sector (Individually/Company-Owned)

Motive:

• Maximizing profit for owners or shareholders.
• Expand business, invest in innovation, and create more jobs.
• Improve efficiency and competition in the market.

Examples:

• Reliance Industries (petroleum, telecom, retail).
• Tata Motors (manufacturing cars and trucks).
• Infosys & TCS (IT and software services).

Download Chapter - 2 Sectors of Indian Economy notes :-   Chapter - 2 Sectors of the Indian Economy