Class 10 Economics Chapter 2 Notes - Sectors of the Indian Economy

Sectors of Economic Activities

• Sectors are communities of individuals engaged in various activities, including creating goods or services. These economic activities generate income and profit.
• For instance, a farmer cultivates crops to sell for profit, while an industry produces goods or services for consumers to make money.

This pie chart shows the distribution of contributions from different sectors to the economy.
It is divided into three main sections: Services, Industry, and Agriculture.

• Services: This is the largest section, taking up 56% of the chart. This means that more than half of the economy's output comes from the services sector, which includes things like banking, education, healthcare, and IT services.

• Industry: The next largest section is Industry, which contributes 26% to the economy. Industries involve manufacturing, construction, and other activities that produce goods.

• Agriculture: The smallest section, at 18%, is Agriculture. This sector involves farming, fishing, and forestry.

Different Areas of the Indian Economy

1. Primary Sector 

Examples:

• Agriculture: Cultivation of cotton (depends on rainfall, sunshine, climate).
• Dairy: Milk production (depends on biological processes and fodder).
• Mining: Extraction of minerals and ores.

Characteristics: Forms the base for other products; also known as agriculture and related sector.

2. Secondary Sector 

Examples:

• Textiles: Spinning yarn and weaving cloth from cotton.
• Food Production: Making sugar or gur from sugarcane.
• Construction: Converting earth into bricks and using bricks for building houses.

Characteristics: Involves manufacturing processes; also known as industrial sector.

3. Tertiary Sector

Examples:

• Transport: Moving goods by trucks or trains.
• Storage: Warehousing goods.
• Communication: Telephone and postal services.
• Banking: Financial services for production and trade.
• Trade: Wholesale and retail selling.

Characteristics: Generates services rather than goods; also known as the service sector.

Comparing the Three Sectors

Each sector contributes to the economy's total output of goods and services. The proportion of goods and services produced and the number of people employed can vary across sectors. Some sectors may dominate in production and employment, while others remain smaller.

Gross Domestic Product (GDP) 

• To include the value of final goods and services including the value of all the intermediate goods
• The value of final goods and services produced in each sector during a particular year provides the total production of the sector for that year. 
• The sum of production in the three sectors gives what is called the Gross Domestic Product (GDP) of a country. 
• It is the value of all final goods and services produced within a country during a particular year. 
• GDP shows how big the economy is.
• Task of measuring GDP by a central government ministry with the help of various govt, departments of all States and Union Territories.

Historical Changes in Sectors

Early Development:

• Primary Sector Dominance: Initially, the primary sector was crucial for economic activity. Agriculture was the mainstay, with significant employment and production in natural goods.
• Technological Advancements: As farming methods improved, agriculture produced more food, allowing people to engage in other activities like crafting and trading.
• Emergence of Other Roles: Increased buying, selling, and the rise of transporters, administrators, and the army.

Shift to Secondary Sector:

• Industrialization: Over time, advancements in manufacturing led to the growth of factories. Former farm workers shifted to factory jobs.
• Secondary Sector Growth: The secondary sector (industrial) became more important in production and employment due to cheap, mass-produced goods. Industries such as food processing, textiles, and equipment manufacturing expanded.
• Support Services: Development of banking, healthcare, and education services.

Recent Changes:

• Tertiary Sector Emergence: In the past 100 years, the tertiary sector (services) has become the most significant in terms of total production and employment.
• Service Sector Dominance: The service sector now employs most people and includes essential services such as transportation, communication, and IT.

Primary, Secondary and Tertiary Sectors in India

• Graph 1 illustrates the production of goods and services across three sectors.
• This data is presented for two specific years: 1973-74 and 2013-14.
• The choice of these two years is based on the comparable and authentic nature of the data.
• The graph highlights the growth in total production over a period of forty years.

Rising Importance of the Tertiary Sector in Production

The tertiary sector overtook the primary sector as India's largest producing sector in 2013-14. The tertiary sector in India has been increasingly important for the following reasons:

1. Hospitals, educational institutions, post and telegraph services, police stations, courts, village administrative offices, municipal corporations, defense, transportation, banks, insurance businesses, and other services are considered vital for everyone.
2. Agriculture and industry expansion lead to the expansion of services such as transportation, commerce, and storage.
3. As people's incomes rise, they expect more luxuries like dining out, tourism, shopping, private hospitals, private schools, professional training, and so on.
4. During the recent decade, several new information and communication technology-based services have become increasingly important and indispensable.

However, The service sector in India is not growing uniformly for everyone.

• This sector employs a variety of people with different skills and education levels.
• On one side, there are a few services that require highly skilled and educated workers.
• On the other side, many workers are involved in services like:
  1. Small shopkeepers
  2. Repair workers
  3. Transport workers
• These individuals often struggle to earn a living.
• They continue to work in these jobs because there are few alternative job options available.
• As a result, only a portion of the service sector is becoming more important.
• More details about this will be provided in the next section.

Disguised Unemployment: Unemployment is the only aspect of the economy that has no bearing on overall output. When productivity is low and there are too many people for too few jobs, this happens. It can apply to any group of people that aren't working to their full potential.

Where are most of the people employed?

• Graph 2 shows the percentage of GDP that comes from three different sectors. 
•  It highlights how the importance of these sectors has changed over a period of forty years. 
•  Even though the share of GDP from each sector has varied, the patterns of employment have stayed mostly the same.

Lack of Shift in Employment:

• Graph 2 shows the percentage contribution of sectors to GDP, indicating shifts in sector importance over forty years.
• Despite increased industrial output (nine times), employment in the industry grew only three times.
• Service sector production rose 14 times, but employment grew five times.

• Graph 3 shows how jobs are spread out among three sectors during two different years: 1977-78 and 2017-18.
• The primary sector still employs the most people compared to the other sectors.
• This data helps to understand how employment in various sectors has changed over the years.
•  The comparison highlights the trends in job distribution from the past to the present. 

Current Employment Distribution:

• Graph 3 illustrates the share of employment in the three sectors for 1977-78 and 2017-18, showing the primary sector still as the largest employer.
• Over half of the workers are in the primary sector (mainly agriculture), producing about one-sixth of the GDP.
• Secondary and tertiary sectors produce the remaining GDP but employ only about half the workforce.

Underemployment in Agriculture:

• High number of workers in agriculture compared to actual production needs.
• Example: A farmer like Laxmi with a small plot employs all family members despite their work being divided and underutilized.
• This situation is termed "underemployment" or "disguised unemployment," where workers are not fully utilized.

Impact of Removing Underemployed Workers:

• Removing a few workers from agriculture does not impact production but increases family income through alternative employment.
• Example: If Laxmi’s family members work elsewhere, they earn extra income without affecting farm productivity.
• Many small farmers in India face similar underemployment issues.
• Reducing agricultural workforce and providing better opportunities elsewhere can boost overall income without harming agricultural output.

Underemployment in Other Sectors:

• Casual workers in the urban service sector often face irregular employment.
• Examples include workers in odd jobs or low-income street vendors with limited opportunities.

How to Create More Employment?

• People can find work by locating industries and services in semi-rural areas and identifying, advertising, and locating them. 
• Every state or region has the potential to boost its residents' income and job opportunities. 
• Tourism, regional craft industries, and emerging services like IT can all help. 
• According to NITI Aayog, research undertaken by the Planning Commission, approximately 20 lakh employments can be produced in the education sector alone.
• In 2005, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was enacted by the central government of India to implement the Right to Work in about 625 districts across the country. 

MGNREGA (2005)

• It is primarily used by people living in rural areas who can and are willing to work. 
• It is called Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA 2005).
• Every year, the MGNREGA gives at least 100 work days to rural households that voluntarily volunteer to conduct unskilled work.
• The MGNREGA scheme is open to any Indian citizen over the age of 18 who lives in a rural area.
• Another goal of the MGNREGA act is to give rural communities long-term assets such as roads, wells, and ponds.
• If the government fails to produce jobs, the people will be forced to rely on unemployment benefits.
• It is implemented without the use of contractors or agents in gram panchayats.
• This law aids in the preservation of the village environment, the empowerment of rural women, the promotion of social equality, the reduction of migration to urban regions, and the provision of essential services, among other things. 

Division of Sectors as Organised and Unorganised

Example: Consider working condition of kanta and kamal 

Kanta works in an office with fixed hours from 9:30 a.m. to 5:30 p.m. She receives a regular monthly salary, along with benefits like provident fund, medical allowances, and paid holidays (including Sundays). When she started, she was given an appointment letter outlining the terms of her employment. Kanta works in an organised sector. 

Kamal is Kanta’s neighbor and works as a daily wage laborer in a grocery shop. He works long hours from 7:30 a.m. to 8:00 p.m. Kamal receives no additional benefits or paid holidays and is only paid for the days he works. He does not have a formal appointment letter and can be dismissed at any time. Kamal works in an unorganised sector. 

1. Organized Sector: 

• Organized sectors are those that provide fixed and secure employment as well as work for a limited amount of time to their employees based on their motivation and qualifications.
• These industries adhere to the government's norms and regulations.
• Employees in the organized sector have job security.

2. Unorganized Sector: 

• The government seems to have little influence over the unorganized sector.
• Workers in the unorganized sector do not have the same level of job security as those in the organized sector.
• Overtime work is not compensated in any way. 

How to Protect Workers in Unorganised Sector?

The organized sector is known for offering desirable jobs, but its expansion has been slow. Many organized sector companies operate in the unorganized sector to avoid taxes and bypass labor protection laws. Consequently, numerous workers are compelled to seek employment in the unorganized sector, where wages are low, irregular, and often exploitative. Since the 1990s, there has been a noticeable trend of workers losing jobs in the organized sector and being forced into the unorganized sector with diminished earnings. This situation highlights the need not only for more employment opportunities but also for the protection and support of unorganized sector workers.

Vulnerable Groups in the Unorganized Sector

Rural Areas:

• In rural regions, the unorganized sector primarily includes landless agricultural laborers, small and marginal farmers, sharecroppers, and artisans such as weavers, blacksmiths, carpenters, and goldsmiths.
• Around 80 percent of rural households in India fall under the small and marginal farmer category. These farmers require support through timely delivery of seeds, agricultural inputs, credit, storage facilities, and marketing outlets.

Urban Areas:

• The unorganized sector in urban areas consists mainly of workers in small-scale industries, casual workers in construction, trade, and transport, as well as street vendors, head load workers, garment makers, and rag pickers.
• Small-scale industries also need government support for procuring raw materials and marketing their outputs.

Social Discrimination:

• Workers from scheduled castes, tribes, and backward communities predominantly find themselves in the unorganized sector.
• In addition to facing irregular and low-paid work, these workers also experience social discrimination.

Conclusion:

Providing protection and support to unorganized sector workers is essential for both economic and social development. Ensuring fair wages, job security, and social equity for these vulnerable groups is crucial for building a more inclusive and equitable society.

Sectors in Terms of Ownership: Public and Private Sectors

1. Public Sector:

• Ownership and Control: Government owns most assets and provides services.
• Purpose: Focuses on public welfare, not just profit. Funded through taxes.
• Examples: Railways, post offices.

Government's Role:

• Infrastructure Development: Invests in roads, bridges, railways, harbours, and electricity generation. These require large sums of money and are often beyond private sector capacity.
• Support for Industries: Provides affordable electricity to prevent small-scale industries from shutting down and buys and stores agricultural products to sell at lower prices.
• Human Development: Provides essential services like health and education. Ensures availability of safe drinking water, housing, and nutrition for the poor.
• Challenges: Private sector may not provide certain essential services at reasonable costs, necessitating government intervention.

2. Private Sector:

• Ownership and Control: Private individuals or corporations own assets and provide services.
• Purpose: Driven by profit motives. Consumers pay for services and products.
• Examples: Tata Iron and Steel Company Limited (TISCO), Reliance Industries Limited (RIL).

Characteristics: Activities are guided by profitability. Government sometimes supports private sector activities to ensure they are viable or to reduce costs for consumers.

Summary

In this chapter, we explored how to classify economic activities into meaningful groups. One method is to categorize these activities into primary, secondary, or tertiary sectors. Over the past thirty years in India, data shows that while the tertiary sector contributes the most to the Gross Domestic Product (GDP), the majority of employment still resides in the primary sector. We also discussed various ways to enhance employment opportunities in the country.

Another classification involves distinguishing between organized and unorganized sectors. A significant portion of the workforce is employed in unorganized sectors, making it crucial to provide them with necessary protections. Additionally, we examined the differences between private and public activities, emphasizing the importance of public activities focusing on specific areas for the greater good.