CH-2 SECTORS OF INDIAN

ECONOMY
NOTES

Sectors of Economic Activities

Sector defines a large segment of the economy in which businesses share the same or
a related product or service.

1. When we produce goods by extraction and collection of natural resources, it is known as

the primary sector. E.g., Farming, forestry, hunting, fishing and mining.
2. The secondary sector covers activities in which natural products are changed into other
forms through ways of manufacturing. It is the next step after the primary. Some
manufacturing processes are required here. It is also called the industrial sector. For
example, using cotton fibre from the plant, we spin yarn and weave cloth. Using sugarcane
as raw material, we make sugar or gur.
3. The tertiary sector includes 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 support for the production process. It is also called the service sector. Example:
Teachers, doctors, washermen, barbers, cobblers, lawyers, call centres, software
companies, etc.

Comparing the 3 Sectors

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 the Gross Domestic Product (GDP) of a country. GDP is the value
of all final goods and services produced within a country during a particular year. It
shows how big the economy is. In India, the task of measuring GDP is undertaken by a
central government ministry.

The graph below shows the production of goods and services in the three sectors.
In the year 2013-14, the tertiary sector emerged as the largest producing sector in India,
replacing the primary sector. The tertiary sector has become important in India because
of the following reasons:

1. Services such as hospitals, educational institutions, post and telegraph services, police
stations, courts, village administrative offices, municipal corporations, defence, transport,
banks, insurance companies, etc., are considered basic services and are necessary for all
people.
2. The development of agriculture and industry leads to the development of services such as
transport, trade, storage, etc.
3. With the rise in the income of people, they start demanding more services like eating out,
tourism, shopping, private hospitals, private schools, professional training, etc.
4. Over the past decade, certain new services based on information and communication
technology have become important and essential.

Where are Most People Employed?

Primary Sector Secondary Sector Tertiary Sector
 More than half of the workers in India These sectors employ less than half the
are working in the primary sector, mainly people as compared to the primary sector.
in agriculture.

It contributes to only a quarter of the These sectors produce four-fifths of the

GDP. product.

How to Create More Employment?

Employment can be given to people by identifying, promoting and locating industries
and services in semi-rural areas. Every state or region has the potential for increasing
the income and employment for people in that area. It can be done by tourism, or
regional craft industry, or new services like IT. A study conducted by the Planning
Commission (known as NITI Aayog) estimates that nearly 20 lakh jobs can be created
in the education sector alone.

The central government in India made a law implementing the Right to Work in about
625 districts of India, which is called the Mahatma Gandhi National Rural
Employment Guarantee Act (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.

Division of Sectors as Organised and Unorganised

Organised Sector Unorganised Sector

It is a sector where the employment terms are fixed The unorganised sector is
and regular, and the employees get assured work. characterised by small and
scattered units, which are largely
outside the control of the
government.

They are registered by the government and have to There are rules and regulations
follow its rules and regulations, which are given in but these are not followed since
various laws such as the Factories Act, Minimum they are not registered with the
Wages Act, Payment of Gratuity Act, Shops and government.
Establishments Act, etc.
 The job is regular and has fixed working hours. If Jobs are low-paid and often not
people work more, they get paid for the overtime by regular.
the employer.

Workers enjoy the security of employment. Employment is not secure.

People can be asked to leave
without any reason.

People working in the organised sector get several There is no provision for
other benefits from the employers, such as paid overtime, paid leave, holidays,
leave, payment during holidays, provident fund, leave due to sickness, etc.
gratuity, etc.

People get medical benefits. The factory manager There are no such facilities in the
has to ensure facilities like drinking water and a unorganised sector.
safe working environment. When they retire, these
workers get pensions as well.

Examples of the organised sectors are Government Examples of the unorganised

employees, registered industrial workers, sectors are Shopkeeping,
Anganwadi workers, village health workers, etc. Farming, Domestic works,
Labouring, Rickshaw pulling, etc.

How to Protect Workers in Unorganised Sector?

There is a need for protection and support of the workers in the unorganised sector.
Here are a few points which will help in doing so.

1. The government can fix the minimum wage rate and working hours.
2. The government can provide cheap loans to self-employed people.
3. Government can provide cheap and affordable basic services like education, health, food to
these workers.
4. The government can frame new laws which can provide provisions for overtime, paid leave,
leave due to sickness, etc.

Sectors in Term of Ownership: Public and Private Sectors

Public Sector Private Sector

In the public sector, the government In the private sector, ownership of assets and
owns most of the assets and delivery of services is in the hands of private
 provides all the services. individuals or companies.

Railways or post office is an Companies like Tata Iron and Steel Company
example of the public sector. Limited (TISCO) or Reliance Industries Limited
(RIL) are privately owned companies.

The purpose of the public sector is Activities in the private sector are guided by the
not just to earn profits. Its main aim motive to earn profits.
is public welfare.

Responsibilities of Government
There are a large number of activities which are the primary responsibility of the
government. Here, we have listed a few of them:

1. Government raises money through taxes and other ways to meet expenses on the services
rendered by it.
2. Governments have to undertake heavy spending such as the construction of roads, bridges,
railways, harbours, generating electricity, providing irrigation through dams, etc. Also, it has
to ensure that these facilities are available for everyone.
3. There are some activities which the government has to support to encourage the private
sector to continue their production or business.
4. The government in India buys wheat and rice from farmers at a ‘fair price’ and sells them at a
lower price to consumers through ration shops. In this way, it supports both farmers and
consumers.
5. Running proper schools and providing quality education, health and education facilities for all
are some of the duties of the government.
6. The government also needs to pay attention to aspects of human development such as the
availability of safe drinking water, housing facilities for the poor, food and nutrition, and
taking care of the poorest and most ignored regions of the country.

IMPORTANT
QUESTIONS
Question 21.
Describe the importance of Primary sector in the Indian economy.
Answer:
Importance of Primary sector:

1. Primary Sector provides the basic needs of economy for food and mineral ores.
2. It produces some of the raw materials (like jute, cotton, coal extracted from mines)
for the industrial sector.
3. The Primary sector continued to be the largest employer in the economy even in
the year 2000, the reason being that Secondary and Tertiary sectors still do not
create enough jobs.
4. The agricultural population in the Primary sector provides a very large market of
consumers for the Secondary sector (for buying finished products like clothes,
goods of daily need, fertilizers, etc.).

Question 22.
How can we create more employment in secondary and tertiary sectors in rural India? (2012)
Answer:

1. Investing in basic agricultural infrastructure like construction of dams and canals

for irrigation can lead to a lot of employment generation within the agricultural
sector itself reducing the problem of under employment.
2. If the government invests some money in the storage and transportation of crops, or
makes better rural roads so that mini-trucks reach everywhere, several farmers can
continue to grow and sell these crops throughout the year. This activity can provide
productive employment to not just farmers but also others such as those in services
like transport or trade.
3. Providing credit at a reasonable rate of interest to help farmers buy seeds,
fertilisers, agricultural equipments, pumpsets etc. can generate employment in rural
banking.
4. The government/banks can provide loans at cheap rates to the small farmers to
improve their irrigational facilities like constructing a well so that they can irrigate
their land well and get two to three crops a year instead of one. Thus more people
can be employed in the same field.
5. Another way is to promote and locate industries and services in semi-rural areas
where a large number of people may be employed. For example, setting up a dal
mill, opening a cold storage, starting or promoting honey collection, etc.

Question 23.
Explain the importance of the service sector. (2013)
Or
Explain reasons for the rising importance of the tertiary sector in India. (2012)
Answer:
Tertiary sector or service sector plays a very significant role and its importance is rising day by
day:
 1. Greater the development of primary sector and secondary sector more would be the
demand for Services.
2. Tertiary sector has become the largest producer in India because various kinds of
Services such as hospitals, educational institutions, post and telegraph services,
police stations, courts, village administrative offices, transport, banks, insurance
companies, etc. are required.
3. Even development of agriculture and industry leads to the development of services
such as transport, trade and storage, etc.
4. With the rise in income, demand for more services is rising.
For example, eating out in restaurants, tourism, malls and shopping complexes,
schools, professional training, etc.
5. New services like Information Technology and outsourcing have become very
important for modem day trade and industry.
Unfortunately, the rapid growth of the service sector in India has not yet shown the
expected corresponding increase in employment.

Question 24.
How can employment be increased in both rural and urban areas? Explain. (2013)
Answer:
Ways to provide more employment opportunities in rural areas:

1. Promote and locate industries and services in semi-rural areas where a large
number of people may be employed. Example, setting up a dal mill, opening a cold
storage, starting or promoting honey collection.
2. Promoting small-scale industries, small-scale manufacturing units, agro-processing
industries and providing loans for the same. The government/banks can provide
loans at cheap rates to the small farmers to improve their irrigational facilities so
that they can get two or three crops a year instead of one. Thus more people can be
employed in the same field.
3. If more dams are built and canal water is provided to all the small farmers, then a
lot of employment can be generated in the agricultural sector.
4. If more money is spent on transportation and storage, then not only small farmers
will be benefitted but many more people can be employed in transport and storage
sector.
5. Investing more in tourism and employing more youth in this sector.

Question 25.
“There are several things needed by the society as a whole”. In the light of this statement explain
as to who can provide them at a reasonable cost, the private or the public sector and why? (2013)
Or
Explain any three demerits of private sector.
Answer:
Society as a whole needs several things which the private sector will not be able to provide at a
reasonable cost.
Reasons for this are:
 1. Activities in the private sector are guided by the motive to earn profits and not
welfare of the people,
2. There are several services needed by the society which the private sector cannot
provide at a reasonable price. Activities like construction of roads, bridges,
railways, irrigation through dams etc., require huge amount of money which is
beyond the capacity of the Private sector. Private sector charges high rates for the
use of these services.
3. It is difficult for the Private sector to collect money from thousands of people who
use these services.
4. The Private sector sometimes ignores regional balanced development, equality of
income and development of basic industries.
5. Private sector charges include profit margins whereas the government will charge a
reasonable price for services. It is the primary duty of the government to ensure the
provision of public facilities with a service motto.

Question 26.
Describe any five conditions or aspects that you would consider before accepting a job? (2014)
Answer:
Before accepting a job many factors need to be considered apart from income—

1. These include factors such as facilities for families, working atmosphere, or

opportunity to learn.
2. In another case, a job may give less pay but may offer regular employment that
enhances sense of security. Another job however, may offer high pay but no job
security and also leave no time for family.
3. The terms of employment are as per government rules and regulations.
4. The enterprise also gives several other benefits like paid leave, provident fund,
gratuity, etc.
5. The employer also makes provisions for medical benefits and safe working
environment. A safe and secure environment may allow more women to take up a
variety of jobs.

Question 27.
‘There has been a big change in the three sectors of economic activities, but a similar shift has
not taken place in the share of employment.’ Explain the above statement on the basis of facts.
(2014)
Answer:
Though there has been a change in the share of the three sectors in GDP, similar shift has not
taken place in the structure of employment. The Primary sector continues to be the largest
employer even in the year 2000. The reason for this is that not enough jobs are created in the
Secondary and Tertiary sectors. More than half of the workers in the country are working in the
Primary sector, mainly in agriculture, producing only a quarter of GDP. In contrast to this,
Secondary and Tertiary sectors produce three- fourths of the produce though they employ less
than half of the people.

Reasons:
 1. During the last thirty years in the Indian economy, not enough jobs have been
created in the Secondary and Tertiary sectors, although their output has increased
many folds. As a result more than half of the workers in the country are working in
the primary sector, mainly agriculture, causing gross underemployment due to
overcrowding in the sector.
2. There are more people engaged in agricultural activities than is necessary. The
situation is such that even if we remove a lot of people from agriculture, the
production of this sector will not be affected.

Question 28.
Define tertiary sector. Describe about the different kinds of people employed in this sector in
India. (2014)
Answer:
Tertiary sector. Activities in this sector do not produce any goods. This sector produces services
that act as aid and support to the primary and secondary sector. Services like administration,
police, army, transport, hospitals, educational institutions, post & telegraph, courts, municipal
corporation, banking & insurance, storage, trade and communications are examples of activities
in the tertiary sector. This sector is also known as the Service Sector.

1. The first kind of people are the highly skilled and educated people providing
specialised services. E.g., doctors, lawyers, accountants, etc. There are a limited
number of services that employ highly skilled and educated workers and offer big
salaries.
2. There are also a very large number of workers engaged in services, such as small
shopkeepers, repair persons, transport persons. These people barely manage to earn
a living and yet they perform these services because no alternative opportunities for
work are available to them.
Hence, only a part of this sector is growing in importance.

Question 29.
State any five features each of public sector and private sector. (2015)
Answer:
Public Sector:

1. The government owns most of the assets.

2. All the services are provided by the government.
3. The main motive of the public sector is the welfare of the people (masses).
Activities are guided by the interest of the nation as a whole.
4. Employees feel secured and there is discipline and regular work.
5. Governments raise money through taxes and other meAnswer:
6. For example, railways, post offices, construction of roads, bridges, harbours, dams,
etc.

Private Sector:
 1. In the private sector, ownership of assets is in the hands of private individuals or
companies.
2. Services are provided or are in the hands of individuals.
3. Activities in the private sector are guided by the motive to earn profits and not
welfare of the people.
4. Jobs of the employees are less secured and the whims of the owners are above all.
5. Private sector charges high rates for the use of services provided by them.
6. For example, Companies like Tata Iron and Steel Co. (TISCO), Reliance
Industries, etc.

Question 30.
Explain with suitable examples how public sector contributes to the economic development of
the nation. (2015)
Answer:
Role of Public sector in economic development. The Public sector is that sector of the economy
in which the government owns most of the assets and provides all the services, e.g., railways,
post and telegraph.

1. It promotes rapid economic development through creation and expansion of

infrastructure.
2. The public sector provides various services and facilities like construction of roads,
bridges, railways, irrigation through dams, etc. where heavy spending is required.
3. A large number of activities are a primary responsibility of the government like
schools, hospitals, housing, safe drinking water, etc.
4. Certain activities are meant to be supported by the government, like providing
electricity to small scale industries at low prices, supply of food to the poor, etc. It
encourages development of small, medium and cottage industries.
5. It ensures availability of goods and services at moderate rates and also contributes
to community development through creation and expansion of infrastructure.

Question 31.
How can workers in the unorganised sector be protected? Explain giving examples of rural and
urban areas.
Answer:
There is need for protection and support of the workers in the unorganised sector:

1. In the rural areas, this sector comprises of landless agricultural labourers, small and
marginal farmers, share croppers and artisans (weaners, carpenters, goldsmiths).
These farmers need to be supported through adequate facility for timely delivery of
seeds, agricultural inputs, credit, storage facilities and marketing outlets.
2. In urban areas, workers in the small scale industry, casual workers in construction,
trade and transport, street vendors, head load workers, garment makers, ragpickers
etc. are all a part of the unorganised sector. Small scale workers need government
aid for procuring raw materials and marketing of their goods.
 3. The government must make concerted efforts to ensure that workers in this sector
are not exploited and earn fair wages. They must also be provided with job security
and other benefits.

Question 32.
Describe certain activities of public interest on which the government has to focus on priority
basis. (Board Question)
Answer:
Activities of public interest on which the government needs to focus on a priority basis:

1. Education. The government must provide adequate education facilities in all rural
and urban areas. The government must necessarily focus on education for girls so
that all girls are able to acquire atleast secondary level schooling. Running proper
schools and providing quality education, particularly elementary education, is the
duty of the government.
2. Health and Nutrition,
1. Basic health care facilities are a must for all. Establishment of
government hospitals, clinics and dispensaries, especially in rural
areas, to provide subsidized and unadulterated medicines to the
poorer sections of society.
2. An effective Public Distribution System—proper functioning of
ration shops and equitable distribution of food grains is very
essential.
3. Transportation. A well developed public transport system to make it easy for
general public to commute.
4. Electricity. It is the duty of the government to provide electricity and water at
reasonable rates to the common man and prevent him from exploitation by private
companies.

Question 33.
Compare the employment conditions prevailing in the Organized and Unorganized sectors.
(NCERT Question)
Answer:
Organized sector:

1. In this sector, terms of employment are regular and people have assured work.
2. They are registered by the government.
3. Workers enjoy security of employment, they have to work for fixed hours, they are
paid overtime and enjoy several other benefits like paid leave, payment during
holidays, Provident Fund, gratuity, pension, retirement benefits, medical benefits,
etc.
4. Entities under Organized sector have to follow the rules and regulations which are
given in various laws (Factories Act, Minimum Wages Act, Payment of Gratuity
Act, Shops and Establishment Act).

Unorganized sector:
 1. In this sector, employment is not secure and jobs are irregular.
2. Here government rules are not followed as they are outside the control of the
government.
3. Usually, they offer low-paid jobs, no provision for overtime, paid leave, holiday
leave or sick leave.
4. Employees can be asked to leave without any reason. One can also see a large
number of under-employed workers in this sector.

Question 34.
Explain the importance of the service sector. (2017 D)
Answer:
Tertiary sector or service sector plays a very significant role and its importance is rising day by
day:

1. Greater the development of primary sector and secondary sector more would be the
demand for Services.
2. Tertiary sector has become the largest producer in India because various kinds of
services such as hospitals, educational institutions, post and telegraph services,
police stations, courts, village administrative offices, transport, banks, insurance
companies etc. are required.
3. Even development of agriculture and industry leads to the development of services
such as transport, trade and storage etc.
4. With the rise in income, demand for more services is rising.
For example, eating out in restaurants, tourism, malls and shopping complexes,
schools, professional training.
5. New services like Information Technology and outsourcing have become very
important for modern day trade and industry.
Unfortunately, the rapid growth of the service sector in India has not yet shown the
expected
corresponding increase in employment.

Question 35.
How can employment be increased in both rural and urban areas? Explain. (2017 OD)
Answer:
Ways to provide more employment opportunities in rural areas:

1. Promote and locate industries and services in semi-rural areas where a large
number of people may be employed. For example, setting up a dal mill, opening a
cold storage, starting or promoting honey collection.
2. Promoting small-scale industries, small-scale manufacturing units, agro-processing
industries and providing loans for the same. The government/banks can provide
loans at cheap rates to the small farmers to improve their irrotational facilities so
that they can get two or three crops a year instead of one. Thus more people can be
employed in the same field.
3. If more dams are built and canal water is provided to all the small farmers, then a
lot of employment can be generated in the agricultural sector.
 4. If more money is spent on transportation and storage, then not only small farmers
will be benefitted but many more people can be employed in transport and storage
sector.
5. Investing more in tourism and employing more youth in this sector.

Question 36.
“There are several things needed by the society as a whole”. In the light of this statement explain
as to who can provide them at a reasonable cost, the private or the public sector and why? (2017
OD)
Answer:
Society as a whole needs several things which the private sector will not be able to provide at a
reasonable cost.
Reasons for this are:

1. Activities in the private sector are guided by the motive to earn profits and not
welfare of the people.
2. There are several services needed by the society which the private sector cannot
provide at a reasonable price. Activities like construction of roads, bridges,
railways, irrigation through dams, etc., require huge amount of money which is
beyond the capacity of the Private sector. Private sector charges high rates for the
use of these services.
3. It is difficult for the Private sector to collect money from thousands of people who
use these services.
4. The Private sector sometimes ignores regional balanced development, equality of
income and development of basic industries.
5. Private sector charges include profit margins whereas the government will charge a
reasonable price for services. It is the primary duty of the government to ensure the
provision of public facilities with a service motto.