NCERT Textbook: Sectors of the Indian Economy | Indian Economy for UPSC CSE PDF Download

 Page 1


NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER
CHAPTER 2:   SECTORS OF THE INDIAN ECONOMY
An economy is best understood when we
study its components or sectors. Sectoral
classification can be done on the basis of
several criteria. In this chapter, three
types of classifications are discussed:
primary/secondary/tertiary; organised/
unorganised; and public/private. You can
create a discussion about these types by
taking examples familiar to the students
and relate them to their daily life. It is
important to emphasise the changing
roles of sectors. This can be highlighted
further by drawing attention of the
students to the rapid growth of service
sector. While elaborating the ideas
provided in the chapter, the students may
need to be familiarised with a few
fundamental concepts such as Gross
Domestic Product, Employment etc. Since
the students may find this difficult to
understand, it is necessary to explain to
them through examples. Several activities
and exercises are suggested in the chapter
to help the students understand how a
person’s activity could be placed —
whether in the primary, secondary or
tertiary, organised or unorganised, and
public or private sector. You may
encourage the students to talk to various
working people around them (such as
shop owners, casual workers, vegetable
vendors, workshop mechanics, domestic
workers etc.) to know more about how they
live and work. Based on such information,
the students can be encouraged to
develop their own classification of
economic activities.
Another important issue to be
highlighted is about the problems caused
by the changes in the roles of sectors.
The chapter has taken the example of
unemployment and what the government
can do to solve it. The declining importance
of agriculture and growing importance of
industry and services should be related
to the experience of the children by taking
more examples that they may observe in
their day-to-day life. Information derived
from the media could be used for this
purpose. You may encourage the students
to bring important cuttings and stories
from newspapers, which could be
prominently displayed in storyboards, and
encourage the class to discuss these
issues. While discussing the unorganised
sector, the key issue of protecting the
workers engaged in the sector should be
highlighted. You may  also encourage the
students to visit persons and enterprises
in the unorganised sector and get a first
hand experience from real life situation.
Sources for Information
The GDP data used in this chapter
pertaining to Gross Domestic Product at
Factor Cost by Industry of Origin at
2011–12 prices is taken from Real Time
Handbook of Statistics on Indian Economy.
It is a valuable source of GDP and other
information relating to the Indian economy.
For evaluation purposes, particularly to
develop the analytical ability of learners,
teachers can refer to this report through
the Internet to get data for different years.
Due to change in methodology, latest data
is not used in the chapter.
The employment figures are based
on data taken from the five-yearly surveys
on employment and unemployment
conducted by the National Sample Survey
Organisation (NSSO) now known as
National Statistical Office (NSO). NSO is
an organisation under the Ministry of
Statistics and Programme Implementation,
Government of India. The website you can
log onto is: http:/mospi.gov.in. Employment
data is also available from other sources
such as Census of India.
     U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT 18 18 18 18 18
2024-25
Page 2


NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER
CHAPTER 2:   SECTORS OF THE INDIAN ECONOMY
An economy is best understood when we
study its components or sectors. Sectoral
classification can be done on the basis of
several criteria. In this chapter, three
types of classifications are discussed:
primary/secondary/tertiary; organised/
unorganised; and public/private. You can
create a discussion about these types by
taking examples familiar to the students
and relate them to their daily life. It is
important to emphasise the changing
roles of sectors. This can be highlighted
further by drawing attention of the
students to the rapid growth of service
sector. While elaborating the ideas
provided in the chapter, the students may
need to be familiarised with a few
fundamental concepts such as Gross
Domestic Product, Employment etc. Since
the students may find this difficult to
understand, it is necessary to explain to
them through examples. Several activities
and exercises are suggested in the chapter
to help the students understand how a
person’s activity could be placed —
whether in the primary, secondary or
tertiary, organised or unorganised, and
public or private sector. You may
encourage the students to talk to various
working people around them (such as
shop owners, casual workers, vegetable
vendors, workshop mechanics, domestic
workers etc.) to know more about how they
live and work. Based on such information,
the students can be encouraged to
develop their own classification of
economic activities.
Another important issue to be
highlighted is about the problems caused
by the changes in the roles of sectors.
The chapter has taken the example of
unemployment and what the government
can do to solve it. The declining importance
of agriculture and growing importance of
industry and services should be related
to the experience of the children by taking
more examples that they may observe in
their day-to-day life. Information derived
from the media could be used for this
purpose. You may encourage the students
to bring important cuttings and stories
from newspapers, which could be
prominently displayed in storyboards, and
encourage the class to discuss these
issues. While discussing the unorganised
sector, the key issue of protecting the
workers engaged in the sector should be
highlighted. You may  also encourage the
students to visit persons and enterprises
in the unorganised sector and get a first
hand experience from real life situation.
Sources for Information
The GDP data used in this chapter
pertaining to Gross Domestic Product at
Factor Cost by Industry of Origin at
2011–12 prices is taken from Real Time
Handbook of Statistics on Indian Economy.
It is a valuable source of GDP and other
information relating to the Indian economy.
For evaluation purposes, particularly to
develop the analytical ability of learners,
teachers can refer to this report through
the Internet to get data for different years.
Due to change in methodology, latest data
is not used in the chapter.
The employment figures are based
on data taken from the five-yearly surveys
on employment and unemployment
conducted by the National Sample Survey
Organisation (NSSO) now known as
National Statistical Office (NSO). NSO is
an organisation under the Ministry of
Statistics and Programme Implementation,
Government of India. The website you can
log onto is: http:/mospi.gov.in. Employment
data is also available from other sources
such as Census of India.
     U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT 18 18 18 18 18
2024-25
SECTORS
OF THE INDIAN ECONOMY
CHAPTER 2
SECTORS OF ECONOMIC ACTIVITIES
Let us look at these pictures. You will find that people are
engaged in various economic activities. Some of these are
activities producing goods. Some others are producing
services. These activities are happening around us every
minute even as we speak.  How do we understand these
activities? One way of doing this is to group them (classify
them) using some important criterion. These groups are also
called sectors.
2024-25
Page 3


NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER
CHAPTER 2:   SECTORS OF THE INDIAN ECONOMY
An economy is best understood when we
study its components or sectors. Sectoral
classification can be done on the basis of
several criteria. In this chapter, three
types of classifications are discussed:
primary/secondary/tertiary; organised/
unorganised; and public/private. You can
create a discussion about these types by
taking examples familiar to the students
and relate them to their daily life. It is
important to emphasise the changing
roles of sectors. This can be highlighted
further by drawing attention of the
students to the rapid growth of service
sector. While elaborating the ideas
provided in the chapter, the students may
need to be familiarised with a few
fundamental concepts such as Gross
Domestic Product, Employment etc. Since
the students may find this difficult to
understand, it is necessary to explain to
them through examples. Several activities
and exercises are suggested in the chapter
to help the students understand how a
person’s activity could be placed —
whether in the primary, secondary or
tertiary, organised or unorganised, and
public or private sector. You may
encourage the students to talk to various
working people around them (such as
shop owners, casual workers, vegetable
vendors, workshop mechanics, domestic
workers etc.) to know more about how they
live and work. Based on such information,
the students can be encouraged to
develop their own classification of
economic activities.
Another important issue to be
highlighted is about the problems caused
by the changes in the roles of sectors.
The chapter has taken the example of
unemployment and what the government
can do to solve it. The declining importance
of agriculture and growing importance of
industry and services should be related
to the experience of the children by taking
more examples that they may observe in
their day-to-day life. Information derived
from the media could be used for this
purpose. You may encourage the students
to bring important cuttings and stories
from newspapers, which could be
prominently displayed in storyboards, and
encourage the class to discuss these
issues. While discussing the unorganised
sector, the key issue of protecting the
workers engaged in the sector should be
highlighted. You may  also encourage the
students to visit persons and enterprises
in the unorganised sector and get a first
hand experience from real life situation.
Sources for Information
The GDP data used in this chapter
pertaining to Gross Domestic Product at
Factor Cost by Industry of Origin at
2011–12 prices is taken from Real Time
Handbook of Statistics on Indian Economy.
It is a valuable source of GDP and other
information relating to the Indian economy.
For evaluation purposes, particularly to
develop the analytical ability of learners,
teachers can refer to this report through
the Internet to get data for different years.
Due to change in methodology, latest data
is not used in the chapter.
The employment figures are based
on data taken from the five-yearly surveys
on employment and unemployment
conducted by the National Sample Survey
Organisation (NSSO) now known as
National Statistical Office (NSO). NSO is
an organisation under the Ministry of
Statistics and Programme Implementation,
Government of India. The website you can
log onto is: http:/mospi.gov.in. Employment
data is also available from other sources
such as Census of India.
     U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT 18 18 18 18 18
2024-25
SECTORS
OF THE INDIAN ECONOMY
CHAPTER 2
SECTORS OF ECONOMIC ACTIVITIES
Let us look at these pictures. You will find that people are
engaged in various economic activities. Some of these are
activities producing goods. Some others are producing
services. These activities are happening around us every
minute even as we speak.  How do we understand these
activities? One way of doing this is to group them (classify
them) using some important criterion. These groups are also
called sectors.
2024-25
     U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
20 20 20 20 20
There are many activities that are
undertaken by directly using
natural resources. Take, for
example, 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. Similarly, in the case of an
activity like dairy, we are dependent
on the biological process of
the animals and availability
of fodder etc. The product
here, milk, also is a natural
product. Similarly, minerals
and ores are also natural
products. When we produce
a good by exploiting natural
resources, it is an activity of
the primary sector. Why
primary? This is because it
forms the base for all
other products that we
subsequently make. Since
most of the natural
products we get are from
agriculture, dairy, fishing,
forestry, this sector is also
called agriculture and related
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. It is
the next step after primary. 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.  For example,
using cotton fibre from the plant, we
spin yarn and weave cloth. Using
sugarcane as a raw material, we make
sugar or gur. We convert earth into
bricks and use bricks to make houses
and buildings. Since this sector
gradually became associated with the
different kinds of industries that came
up, it is also called as industrial sector.
After primary and secondary, there
is a third category of activities that falls
under tertiary sector and is different
from the above two. These are
activities that 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 a support for the production
process. For example, goods that are
produced in the primary or secondary
sector would need to be transported
by trucks or trains and then sold in
wholesale and retail shops. At times,
it may be necessary to store these in
godowns. We also may need to talk to
others over telephone or send letters
(communication) or borrow money
from banks (banking) to help
production and trade. Transport,
storage, communication, banking,
trade are some examples of tertiary
activities. Since these activities
generate services rather than goods,
the tertiary sector is also called the
service sector.
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 cafe, ATM booths, call
centres, software companies etc have
become important.
Tertiary
(Service)
Sector
Primary
(Agriculture)
Sector
Secondary
(Industrial)
Sector
produces
natural
goods
produces
manufactured
goods
helps to develop
other sectors
We begin by looking at different
kind of economic activities.
2024-25
Page 4


NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER
CHAPTER 2:   SECTORS OF THE INDIAN ECONOMY
An economy is best understood when we
study its components or sectors. Sectoral
classification can be done on the basis of
several criteria. In this chapter, three
types of classifications are discussed:
primary/secondary/tertiary; organised/
unorganised; and public/private. You can
create a discussion about these types by
taking examples familiar to the students
and relate them to their daily life. It is
important to emphasise the changing
roles of sectors. This can be highlighted
further by drawing attention of the
students to the rapid growth of service
sector. While elaborating the ideas
provided in the chapter, the students may
need to be familiarised with a few
fundamental concepts such as Gross
Domestic Product, Employment etc. Since
the students may find this difficult to
understand, it is necessary to explain to
them through examples. Several activities
and exercises are suggested in the chapter
to help the students understand how a
person’s activity could be placed —
whether in the primary, secondary or
tertiary, organised or unorganised, and
public or private sector. You may
encourage the students to talk to various
working people around them (such as
shop owners, casual workers, vegetable
vendors, workshop mechanics, domestic
workers etc.) to know more about how they
live and work. Based on such information,
the students can be encouraged to
develop their own classification of
economic activities.
Another important issue to be
highlighted is about the problems caused
by the changes in the roles of sectors.
The chapter has taken the example of
unemployment and what the government
can do to solve it. The declining importance
of agriculture and growing importance of
industry and services should be related
to the experience of the children by taking
more examples that they may observe in
their day-to-day life. Information derived
from the media could be used for this
purpose. You may encourage the students
to bring important cuttings and stories
from newspapers, which could be
prominently displayed in storyboards, and
encourage the class to discuss these
issues. While discussing the unorganised
sector, the key issue of protecting the
workers engaged in the sector should be
highlighted. You may  also encourage the
students to visit persons and enterprises
in the unorganised sector and get a first
hand experience from real life situation.
Sources for Information
The GDP data used in this chapter
pertaining to Gross Domestic Product at
Factor Cost by Industry of Origin at
2011–12 prices is taken from Real Time
Handbook of Statistics on Indian Economy.
It is a valuable source of GDP and other
information relating to the Indian economy.
For evaluation purposes, particularly to
develop the analytical ability of learners,
teachers can refer to this report through
the Internet to get data for different years.
Due to change in methodology, latest data
is not used in the chapter.
The employment figures are based
on data taken from the five-yearly surveys
on employment and unemployment
conducted by the National Sample Survey
Organisation (NSSO) now known as
National Statistical Office (NSO). NSO is
an organisation under the Ministry of
Statistics and Programme Implementation,
Government of India. The website you can
log onto is: http:/mospi.gov.in. Employment
data is also available from other sources
such as Census of India.
     U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT 18 18 18 18 18
2024-25
SECTORS
OF THE INDIAN ECONOMY
CHAPTER 2
SECTORS OF ECONOMIC ACTIVITIES
Let us look at these pictures. You will find that people are
engaged in various economic activities. Some of these are
activities producing goods. Some others are producing
services. These activities are happening around us every
minute even as we speak.  How do we understand these
activities? One way of doing this is to group them (classify
them) using some important criterion. These groups are also
called sectors.
2024-25
     U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
20 20 20 20 20
There are many activities that are
undertaken by directly using
natural resources. Take, for
example, 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. Similarly, in the case of an
activity like dairy, we are dependent
on the biological process of
the animals and availability
of fodder etc. The product
here, milk, also is a natural
product. Similarly, minerals
and ores are also natural
products. When we produce
a good by exploiting natural
resources, it is an activity of
the primary sector. Why
primary? This is because it
forms the base for all
other products that we
subsequently make. Since
most of the natural
products we get are from
agriculture, dairy, fishing,
forestry, this sector is also
called agriculture and related
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. It is
the next step after primary. 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.  For example,
using cotton fibre from the plant, we
spin yarn and weave cloth. Using
sugarcane as a raw material, we make
sugar or gur. We convert earth into
bricks and use bricks to make houses
and buildings. Since this sector
gradually became associated with the
different kinds of industries that came
up, it is also called as industrial sector.
After primary and secondary, there
is a third category of activities that falls
under tertiary sector and is different
from the above two. These are
activities that 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 a support for the production
process. For example, goods that are
produced in the primary or secondary
sector would need to be transported
by trucks or trains and then sold in
wholesale and retail shops. At times,
it may be necessary to store these in
godowns. We also may need to talk to
others over telephone or send letters
(communication) or borrow money
from banks (banking) to help
production and trade. Transport,
storage, communication, banking,
trade are some examples of tertiary
activities. Since these activities
generate services rather than goods,
the tertiary sector is also called the
service sector.
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 cafe, ATM booths, call
centres, software companies etc have
become important.
Tertiary
(Service)
Sector
Primary
(Agriculture)
Sector
Secondary
(Industrial)
Sector
produces
natural
goods
produces
manufactured
goods
helps to develop
other sectors
We begin by looking at different
kind of economic activities.
2024-25
S S S S SECTORS ECTORS ECTORS ECTORS ECTORS     OF OF OF OF OF     THE THE THE THE THE I I I I INDIAN NDIAN NDIAN NDIAN NDIAN E E E E ECONOMY CONOMY CONOMY CONOMY CONOMY
21 21 21 21 21
EXAMPLE
Imagine what would happen if farmers
refuse to sell sugarcane to a particular
sugar mill. The mill will have to shut
down.
Imagine what would happen to cotton
cultivation if companies decide not to
buy from the Indian market and import
all cotton they need from other
countries. Indian cotton cultivation will
become less profitable and the farmers
may even go bankrupt, if they cannot
quickly switch to other crops. Cotton
prices will fall.
Farmers buy many goods such as
tractors, pumpsets, electricity,
pesticides and fertilisers. Imagine what
would happen if the price of fertilisers
or pumpsets go up. Cost of cultivation
of the farmers will rise and their profits
will be reduced.
People working in industrial and service
sectors need food. Imagine what would
happen if there is a strike by
transporters and lorries refuse to take
vegetables, milk, etc. from rural areas.
Food will become scarce in urban areas
whereas farmers will be unable to sell
their products.
1. Complete the above table to show how sectors are dependent on each other.
2. Explain the difference between primary, secondary and tertiary sectors using
examples other than those mentioned in the text.
3. Classify the following list of occupations under primary, secondary and tertiary sectors:
LET’S WORK THESE OUT
WHAT DOES THIS SHOW?
This is an example of the secondary or
industrial sector being dependent on
the primary.
• Tailor
• Basket weaver
• Flower cultivator
• Milk vendor
• Fishermen
• Priest
• Courier
• Workers in match factory
• Moneylender
• Gardener
• Potter
• Bee-keeper
• Astronaut
• Call centre employee
4. Students in a school are often classified into primary and secondary or junior and
senior. What is the criterion that is used? Do you think this is a useful classification?
Discuss.
TABLE 2.1 EXAMPLES OF ECONOMIC ACTIVITIES
Economic activities, though, are grouped into three different categories,
are highly interdependent. Let us look at some examples.
2024-25
Page 5


NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER NOTES FOR THE TEACHER
CHAPTER 2:   SECTORS OF THE INDIAN ECONOMY
An economy is best understood when we
study its components or sectors. Sectoral
classification can be done on the basis of
several criteria. In this chapter, three
types of classifications are discussed:
primary/secondary/tertiary; organised/
unorganised; and public/private. You can
create a discussion about these types by
taking examples familiar to the students
and relate them to their daily life. It is
important to emphasise the changing
roles of sectors. This can be highlighted
further by drawing attention of the
students to the rapid growth of service
sector. While elaborating the ideas
provided in the chapter, the students may
need to be familiarised with a few
fundamental concepts such as Gross
Domestic Product, Employment etc. Since
the students may find this difficult to
understand, it is necessary to explain to
them through examples. Several activities
and exercises are suggested in the chapter
to help the students understand how a
person’s activity could be placed —
whether in the primary, secondary or
tertiary, organised or unorganised, and
public or private sector. You may
encourage the students to talk to various
working people around them (such as
shop owners, casual workers, vegetable
vendors, workshop mechanics, domestic
workers etc.) to know more about how they
live and work. Based on such information,
the students can be encouraged to
develop their own classification of
economic activities.
Another important issue to be
highlighted is about the problems caused
by the changes in the roles of sectors.
The chapter has taken the example of
unemployment and what the government
can do to solve it. The declining importance
of agriculture and growing importance of
industry and services should be related
to the experience of the children by taking
more examples that they may observe in
their day-to-day life. Information derived
from the media could be used for this
purpose. You may encourage the students
to bring important cuttings and stories
from newspapers, which could be
prominently displayed in storyboards, and
encourage the class to discuss these
issues. While discussing the unorganised
sector, the key issue of protecting the
workers engaged in the sector should be
highlighted. You may  also encourage the
students to visit persons and enterprises
in the unorganised sector and get a first
hand experience from real life situation.
Sources for Information
The GDP data used in this chapter
pertaining to Gross Domestic Product at
Factor Cost by Industry of Origin at
2011–12 prices is taken from Real Time
Handbook of Statistics on Indian Economy.
It is a valuable source of GDP and other
information relating to the Indian economy.
For evaluation purposes, particularly to
develop the analytical ability of learners,
teachers can refer to this report through
the Internet to get data for different years.
Due to change in methodology, latest data
is not used in the chapter.
The employment figures are based
on data taken from the five-yearly surveys
on employment and unemployment
conducted by the National Sample Survey
Organisation (NSSO) now known as
National Statistical Office (NSO). NSO is
an organisation under the Ministry of
Statistics and Programme Implementation,
Government of India. The website you can
log onto is: http:/mospi.gov.in. Employment
data is also available from other sources
such as Census of India.
     U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT 18 18 18 18 18
2024-25
SECTORS
OF THE INDIAN ECONOMY
CHAPTER 2
SECTORS OF ECONOMIC ACTIVITIES
Let us look at these pictures. You will find that people are
engaged in various economic activities. Some of these are
activities producing goods. Some others are producing
services. These activities are happening around us every
minute even as we speak.  How do we understand these
activities? One way of doing this is to group them (classify
them) using some important criterion. These groups are also
called sectors.
2024-25
     U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
20 20 20 20 20
There are many activities that are
undertaken by directly using
natural resources. Take, for
example, 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. Similarly, in the case of an
activity like dairy, we are dependent
on the biological process of
the animals and availability
of fodder etc. The product
here, milk, also is a natural
product. Similarly, minerals
and ores are also natural
products. When we produce
a good by exploiting natural
resources, it is an activity of
the primary sector. Why
primary? This is because it
forms the base for all
other products that we
subsequently make. Since
most of the natural
products we get are from
agriculture, dairy, fishing,
forestry, this sector is also
called agriculture and related
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. It is
the next step after primary. 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.  For example,
using cotton fibre from the plant, we
spin yarn and weave cloth. Using
sugarcane as a raw material, we make
sugar or gur. We convert earth into
bricks and use bricks to make houses
and buildings. Since this sector
gradually became associated with the
different kinds of industries that came
up, it is also called as industrial sector.
After primary and secondary, there
is a third category of activities that falls
under tertiary sector and is different
from the above two. These are
activities that 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 a support for the production
process. For example, goods that are
produced in the primary or secondary
sector would need to be transported
by trucks or trains and then sold in
wholesale and retail shops. At times,
it may be necessary to store these in
godowns. We also may need to talk to
others over telephone or send letters
(communication) or borrow money
from banks (banking) to help
production and trade. Transport,
storage, communication, banking,
trade are some examples of tertiary
activities. Since these activities
generate services rather than goods,
the tertiary sector is also called the
service sector.
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 cafe, ATM booths, call
centres, software companies etc have
become important.
Tertiary
(Service)
Sector
Primary
(Agriculture)
Sector
Secondary
(Industrial)
Sector
produces
natural
goods
produces
manufactured
goods
helps to develop
other sectors
We begin by looking at different
kind of economic activities.
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S S S S SECTORS ECTORS ECTORS ECTORS ECTORS     OF OF OF OF OF     THE THE THE THE THE I I I I INDIAN NDIAN NDIAN NDIAN NDIAN E E E E ECONOMY CONOMY CONOMY CONOMY CONOMY
21 21 21 21 21
EXAMPLE
Imagine what would happen if farmers
refuse to sell sugarcane to a particular
sugar mill. The mill will have to shut
down.
Imagine what would happen to cotton
cultivation if companies decide not to
buy from the Indian market and import
all cotton they need from other
countries. Indian cotton cultivation will
become less profitable and the farmers
may even go bankrupt, if they cannot
quickly switch to other crops. Cotton
prices will fall.
Farmers buy many goods such as
tractors, pumpsets, electricity,
pesticides and fertilisers. Imagine what
would happen if the price of fertilisers
or pumpsets go up. Cost of cultivation
of the farmers will rise and their profits
will be reduced.
People working in industrial and service
sectors need food. Imagine what would
happen if there is a strike by
transporters and lorries refuse to take
vegetables, milk, etc. from rural areas.
Food will become scarce in urban areas
whereas farmers will be unable to sell
their products.
1. Complete the above table to show how sectors are dependent on each other.
2. Explain the difference between primary, secondary and tertiary sectors using
examples other than those mentioned in the text.
3. Classify the following list of occupations under primary, secondary and tertiary sectors:
LET’S WORK THESE OUT
WHAT DOES THIS SHOW?
This is an example of the secondary or
industrial sector being dependent on
the primary.
• Tailor
• Basket weaver
• Flower cultivator
• Milk vendor
• Fishermen
• Priest
• Courier
• Workers in match factory
• Moneylender
• Gardener
• Potter
• Bee-keeper
• Astronaut
• Call centre employee
4. Students in a school are often classified into primary and secondary or junior and
senior. What is the criterion that is used? Do you think this is a useful classification?
Discuss.
TABLE 2.1 EXAMPLES OF ECONOMIC ACTIVITIES
Economic activities, though, are grouped into three different categories,
are highly interdependent. Let us look at some examples.
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     U U U U UNDERST NDERST NDERST NDERST NDERSTANDING ANDING ANDING ANDING ANDING E E E E ECONOMIC CONOMIC CONOMIC CONOMIC CONOMIC D D D D DEVEL EVEL EVEL EVEL EVELOPMENT OPMENT OPMENT OPMENT OPMENT
22 22 22 22 22
The various production activities in the primary, secondary
and tertiary sectors produce a very large number of goods
and services. Also, the three sectors have a large number of
people working in them to produce these goods and services.
The next step, therefore, is to see how much goods and services
are produced and how many people work in each sector. In
an economy there could be one or more sectors which are
dominant in terms of total production and employment, while
other sectors are relatively small in size.
How do we count the various goods and
services and know the total production in
each sector?
With so many thousands of goods and services produced,
you might think this is an impossible task! Not only would
the task be enormous, you might also wonder how we can
add up cars and computers and nails and furniture. It won’t
make sense!!!
You are right in thinking so. To get around this problem,
economists suggest that the values of goods and services
should be used rather than adding up the actual numbers.
For example, if 10,000 kgs of wheat is sold at Rs 20 per kg,
the value of wheat will be Rs 2,00,000. The value of 5000
coconuts at Rs 15 per coconut will be Rs 75,000. Similarly,
the value of goods and services in the three sectors are
calculated, and then added up.
Remember, there is one precaution one has to take. Not
every good (or service) that is produced and sold needs to be
counted. It makes sense only to include the final goods and
services. Take, for instance, a farmer who sells wheat to a
flour mill for Rs 20 per kg. The mill grinds the wheat and sells
the flour to a biscuit company for Rs 25 per kg. The biscuit
company uses the flour and things such as sugar and oil to
make four packets of biscuits. It sells biscuits in the market to
the consumers for Rs 80 (Rs 20 per packet). Biscuits are the
final goods, i.e., goods that reach the consumers.
Why are only ‘final goods and services’ counted? In
contrast to final goods, goods such as wheat and the wheat
flour in this example are intermediate goods.  Intermediate
goods are used up in producing final goods and services.
The value of final goods already includes the value of all
the intermediate goods that are used in making the final
good. Hence, the value of Rs 80 for the biscuits (final good)
already includes the value of flour (Rs 25). Similarly, the
value of all other intermediate goods would have been
included. To count the value of the flour and wheat
COMPARING THE THREE SECTORS
...BUT I SHOULD BE PAID THE
FULL VALUE OF THE WHEAT
THAT I PRODUCE !
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