Sectors of the Indian Economy: Class 10 Notes

In Class 10 Economics Chapter 2 students learn about the different sectors of the Indian economy, namely the primary, secondary, and tertiary sectors; organized and unorganized sectors; public and private sectors. These sectors play a crucial role in the country's economic development and provide various employment opportunities. This guide provides comprehensive notes on each sector, helping students understand their significance and contribution to the Indian economy.

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Class 10 Economics Chapter 2 Sectors of the Indian Economy Notes

Sectors of Economic Activities

• People are engaged in various economic activities.
• Some of these are activities producing goods.
• Some others are producing services.
• We can study these economic activities by grouping them (classifying them) using some important criteria. These groups are also called sectors.

Primary (Agriculture) Sector

These are activities that are undertaken by directly using natural resources.

• Example 1: The cultivation of cotton.
  • It takes place within a crop season. For the growth of the cotton plant, we depend mainly, but not entirely, on natural factors like rainfall, sunshine, and climate. The product of this activity, cotton, is a natural product.
• Example 2: Dairy
  • We are dependent on the biological process of the animals and the availability of fodder, etc. The product here, milk, also is a natural product.
• Example 3: Mining
  • Minerals and ores are also natural products.

When we produce goods by exploiting natural resources, it is an activity of the primary sector.

Since most of the natural products we get are from agriculture, dairy, fishing, and forestry, this sector is also called agriculture and related sector.

Secondary (Industrial) Sector

• The secondary sector covers activities in which natural products are changed into other forms through ways of manufacturing that we associate with industrial activity.
• The product is not produced by nature but has to be made and therefore some process of manufacturing is essential. This could be in a factory, a workshop, or at home.
• Since this sector gradually became associated with the different kinds of industries that came up, it is also called as industrial sector.

Tertiary (Service) Sector

• Economic activities in this sector help in the development of the primary and secondary sectors. These activities, by themselves, do not produce a good but they are an aid or support for the production process.
• For example, transport, storage, communication, banking, and trade are some examples of tertiary activities.
• The service sector also includes some essential services that may not directly help in the production of goods.
• For example, we require teachers, doctors, and those who provide personal services such as washermen, barbers, cobblers, lawyers, and people to do administrative and accounting works.
• In recent times, certain new services based on information technology such as internet cafes, ATM booths, call centers, software companies, etc have become important.
• Since these activities generate services rather than goods, the tertiary sector is also called the service sector.

Interdependence of Three Sectors

The tertiary sector does not produce any goods but it helps in the production of goods in the primary and secondary sectors. For example:

• In the primary sector, we need the service of transportation for getting the supply of agricultural inputs and also for selling food grains in the market or supplying agricultural raw materials to agro-based industries.
• In the secondary sector, we need the help of transportation for bringing the raw materials and taking the final products to the market.
• Transportation is required in the service sector as well such as for providing medical facilities to the people and other services like fire services, etc.

Final Goods and Intermediate Goods

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is a broad measurement of a nation’s overall economic activity. GDP is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period.

Historical Change in Sectors

• The histories of many developed countries indicate that the primary sector was the most dominant sector of their economic activity at the initial stages of development. At that stage, most of the goods produced were natural products from the primary sector.
• In the later phase, new methods of manufacturing were introduced, factories came up and people started shifting from agriculture to the secondary sector.
• Later on, there has been a further shift from the secondary sector to the service sector. Most of the people employed in the primary and secondary sectors now shifted to the service sector and thus service sector became the most dominant sector.

Primary, Secondary, and Tertiary Sectors in India

Rising Importance of the Tertiary Sector in Production

Over the forty years between 1973-74 and 2013-14, while production in all three sectors has increased, it has increased the most in the tertiary sector.

As a result, in the year 2013-14, the tertiary sector emerged as the largest producing sector in India replacing the primary sector.

Reasons for Rising Importance of the Tertiary Sector in India:

• Basic services: Services such as hospitals, educational institutions, post and telegraph services, transport, banks, and insurance companies are in this group.
• Development of primary and secondary sectors: The development of agriculture and industry leads to the development of services such as transport, trade, and storage.
• Rise in income levels: As income levels rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, and professional training centers.
• Rise in information technology: Over the past decade or so, certain new services, such as those based on information and communication technology have become important and essential.
• Globalization: Due to globalization, people have become aware of new services and activities, because of which the tertiary sector has gained importance.

But the entire tertiary sector has not grown in importance:

The service sector includes two different kinds of people. One who is highly educated, skilled, and earning very high such as doctors, engineers, software professionals, etc., and on the other hand those who are not educated and unskilled such as street vendors, repair persons, etc. Though the service sector has grown over the past few decades not all of the service sector has grown equally. The educated and highly skilled workers have grown high whereas the uneducated and the unskilled barely manage to earn a living and yet they perform these services because no alternative opportunities for work are available to them.

Where are most of the people employed?

The primary sector is the largest employer in India. Nearly 44% of the population is engaged in this sector in one way or the other. However, its share in the GDP is very less because of the following reasons:

• The average size of the land holdings is very low which results in low productivity per holder.
• Less use of modern technology and know-how among the farmers to increase crop productivity.
• The system of providing financing and marketing facilities has been insufficient since independence. The small and marginal farmers are not able to get benefits from the loan facilities and access to large markets.
• The absence of alternate income-generating activities in rural areas gives rise to disguised unemployment where the efficient labor force is not used.

Underemployment refers to a situation where a person is working, but not in a job that fully utilizes their skills, education, or experience. This can include working in a job that is part-time, temporary, or that pays less than what would be expected for someone with their qualifications. Underemployment can lead to dissatisfaction, frustration, and a sense of wasted potential among workers.

Disguised unemployment, on the other hand, refers to a situation where there are more workers available in a particular labor market than are needed to efficiently produce the current level of output. These workers may not be officially classified as unemployed because they may be working in low-productivity jobs or in informal sectors of the economy, but they are not fully utilizing their skills or abilities. This type of unemployment can lead to underemployment and inefficiency in the economy.

How to create more employment in rural areas?

Employment can be generated in rural areas by:

• People can be employed in projects like the construction of dams/canals/roads in the village.
• Provide irrigation facilities so that farmers harvest two or three crops in a year. Thus, more people can be employed.
• Government can open centers to give them training and financial assistance to help them become self-employed.
• Government can invest and employ people in providing transportation and storage services.
• Honey collection centers and vegetable and fruit processing units should be set up.
• More cottage industries and services should be promoted in rural areas with soft loans and marketing support.

How to create more employment in urban areas?

There are a number of ways to increase urban employment in India, including:

• Encouraging foreign investment: Attracting foreign investment can create jobs in a variety of industries, including manufacturing, technology, and services.
• Developing small and medium-sized enterprises (SMEs): SMEs are a major source of employment in urban areas, and policies that support their growth and development can help to create jobs.
• Providing vocational training: Vocational training can help to match workers with the skills that are in demand in the urban labor market.
• Promoting the growth of the service sector: The service sector, including tourism, retail, and healthcare, is a major source of urban employment in India. Policies that encourage the growth of this sector can help to create jobs.
• Focusing on Infrastructure development: Infrastructure development can create jobs in the short term, as well as make it easier for businesses to operate and for people to move around in the long term.
• Encouraging entrepreneurship: Encouraging entrepreneurship can help to create new businesses and jobs, particularly in the informal sector.
• Improving access to credit: Improving access to credit can help entrepreneurs and small businesses grow, which can create jobs.

Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA 2005)

• The central government in India made a law implementing the Right to Work in about 625 districts of India. It is called Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA 2005).
• Under MGNREGA 2005, all those who are able to, and are in need of work in rural areas are guaranteed 100 days of employment in a year by the government.
• If the government fails in its duty to provide employment, it will give unemployment allowances to the people.
• The types of work that would in the future help to increase the production from land will be given preference under the Act.

Division of Sectors as Organized and Unorganized

Flexible Labor Laws: It means:

• The company hires workers for a short period.
• A lot of pressure and work overtime with no extra payment.
• No work when there is no demand.

Government can:

• Set some laws to see that the companies see the welfare of the workers.
• See if the labor laws are properly implemented.
• Government can create opportunities for alternative employment.

Sectors in Terms of Ownership: Public and Private Sectors

The public sector plays a major role in India than the private sector because:

• The public sector is owned and run by the government. They enable the government to have control over the economy for the benefit of the people in general.
• It creates employment opportunities.
• It generates financial resources for development.
• It ensures equality of income, and wealth and thus a balanced regional development.
• Activities undertaken by the public sector require a huge amount of money. But it provides the services at a lower rate.
• Its investment in the infrastructure sector paves the way for the agricultural and industrial development of a country like India.
• It encourages the development of small, medium, and cottage industries.

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