Chapter 2 – Sectors of The Indian Economy

➢ The economic activities can be classified into

o Primary Sector
▪ Many activities are undertaken by directly using the
natural resources
▪ Similarly, minerals and ores are also natural
products. When we exploit these resources, it is an
activity in the primary sector
▪ It is called as primary because these form base for
all the other products that are subsequently made
o Secondary sector
▪ Covers activities in which natural products are
changed into other forms
▪ These are not made in nature but there is some
manufacturing involved
▪ Since this sector is associated with the different
kinds of industries, it is called as industrial sector
o Tertiary sector
▪ These activities help in development of primary and
secondary sectors
▪ These on themselves do not produce good but they
help in production process (there are also some
essential services that may include production of
goods such as teaching, doctors etc)
▪ Examples are storage, communication, banking etc
▪ These activities generate services hence called as
services sector

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
➢ Comparing these three sectors
o For measurement, it is not possible to add the volumes of
different goods produced. Instead, the values of goods
and services is added
o Not all the goods and services produced and sold needs to
be counted and it makes sense to count/include only the
final goods and services
▪ The intermediary goods and services are not
included. If they are counted, then there will be
double counting as their values are already counted
in the price of final good
▪ The intermediary goods are used in producing final
goods and services. The latter are used for
consumption and not reselling
o The value of final goods and services produced in each
sector is calculated and the same is done for all the three
sectors. This total is called as Gross Domestic Product
(GDP)
▪ Here the goods and services produced within a
country is considered
▪ GDP shows how big an economy is
➢ Changes in sectors
o In the initial stages the primary sector is the most
important of economic activity. With higher production,
people could take up other economic activities
o Over a long period of time, new methods of
manufacturing were introduced, factories were set up.
The secondary sector gradually became more important
in total production and employment
o In the last 100 years there has been a gradual shift from
secondary to tertiary sector in developed countries. The
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 services sector has become the most important in terms
of production and employment
➢ Sector in India
o Comparing 1973-74 and 2013-14
▪ The production in all sectors has increased
▪ The rise in production is highest in tertiary sector
and has emerged as largest producing sector
replacing the primary sector
▪ However, the services sector has not seen growth in
all the industries under it. The employment is also
employed in different numbers – some parts employ
very high, but the income generation is very less
▪ There has been a drastic shift in the contribution
into India’s GDP from three sectors but the same
has not been seen in case of the employment. The
primary sector continues to be largest employer.
This is because
• Enough jobs were not created in secondary
and tertiary
• The agriculture sector has higher than
necessary number of workers and if you move
some out of the sector, it would not be
affected. In other words, the workers in
agriculture are underemployed. In case of
agriculture household, all members are
involved, none of remain idle but the labour
effects are getting divided. Each one is doing
some work, but no one is fully employed. This
is the situation of underemployment (working
below their potential)

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 o This is a hidden underemployment in
contrast to someone who does not have
a job and is clearly visible as
unemployed.
o Hence the situation is also known as
disguised unemployment
• The underemployment can also been in other
sectors as well. Many casual workers do not
find work every day; another situation is
vegetable vendor pushing cart the whole day
but earning very little
o Reasons behind this shift (growth in services sector)
▪ There are multiple services needed, and the
government has taken up the responsibility of
providing these
▪ Development of primary and secondar will also need
the growth in service sector such as transportation,
storage etc
▪ With higher income levels, people will demand more
services
▪ Certain services have become essential in last
decade and there has been higher production these

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
➢ Organised Vs Unorganised sectors
o Organised
▪ Referred to as organised as there is formal
structure, process and procedures
▪ It covers those enterprises or places of work where
the terms of employment are regular, and people
are assured work
▪ These enterprises are registered by the government
and have to follow the rules and regulations given
under various laws – factories act, minimum wages

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
 act, shops and establishment act, payment of
gratuity act etc
▪ Some of these may be self employed i.e. work on
their own, but they have to register with the
government
▪ Workers enjoy security of job, work fixed number of
hours, if work overtime are to be paid for it
▪ Workers also get other benefits such as paid leave,
payments during holidays, provident fund, gratuity
etc
o Unorganised
▪ Characterised by small and scattered units under
outside control of the government
▪ Jobs are low paid and not regular
▪ No provision for overtime, no hidden benefits, no
job security
▪ Sectors include a large number of people employed
on their own doing small jobs such as selling on
street or doing repair work
➢ Protecting the workers in unorganised workers
o The employment opportunities in the organised sector
expand very slowly. Large number of workers are forced
to work in unorganised sector. These jobs pay very less,
are often exploited, not paid fair wages
o Post 1990s there has also been a trend of people losing
jobs in formal organised sector, and these workers are
forced to work in unorganised sector
o In rural areas the unorganised sector comprises landless
agricultural labourers, small and marginal farmers,
artisans etc. these farmers need to be supported through
timely delivery of inputs
SHYAM SHANKAR KAGGOD
(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)
o In urban areas unorganised sector workers comprise
workers in small scale industry, casual workers in
construction etc

SHYAM SHANKAR KAGGOD

(EDUCATOR, DIRECTOR - ACADEMICS, UNACADEMY)