About Sectors of Indian Economy
India is one of the fastest-growing economies in the world and it is predicted that by 2050, it will become the second-largest economy in the world. There are many factors that contribute to the economy.
As of 2018, the Nominal (current) Gross Domestic Product (GDP) of the country is 2.72 lakh crores USD. The estimated nominal GDP of 2020 is USD 3.202 trillion (as per Wikipedia).
One might be curious about the elements that contribute to the Indian economy. To quench curiosity, the different sectors of the Indian economy are discussed here in detail.
There are three sectors of the Indian economy: the primary sector, the secondary sector, and the tertiary sector.
Classification and Examples
1. Primary sector
To keep the day-to-day operations going, this sector's services are completely reliant on the availability of natural resources. Eg. Agriculture, Mining, Fishing, Forestry, Dairy etc.
Agriculture, together with fisheries and forestry, accounts for one-third of India's GDP and is the single most important contributor. 18.20% of GDP contributes to the primary sector.
Agriculture has long been the backbone of India's economy. Aside from that, India is the world's largest producer of milk and the second-largest producer of wheat, sugar, freshwater fish, and groundnuts.
It is a significant producer of tea, cashews, sugar, ginger, turmeric, and black pepper.
The Indian agricultural sector was able to accomplish this remarkable feat as a result of the Indian government's several simultaneous revolutions.
The Black Revolution, which saw the production of petroleum, and the Brown Revolution, which saw the production of leather/non-conventional/cocoa, were both significant revolutions in India's primary sector.
Underemployment and disguised employment are two main issues that this sector faces.
2. Secondary sector
The economics of the sector is based on natural materials that are utilised to manufacture the services and goods that are given, and which are then consumed.
This sector transforms primary sector output (raw materials) into finished goods that can be sold to domestic businesses or consumers, as well as exported (via distribution through the tertiary sector). Many of these industries necessitate large amounts of energy, factories, and machinery, and they are often classified as light or heavy based on these features.
This sector is the best in terms of adding value to products and services. Transportation and industry are two of the most prominent examples of this area.
This sector employs over a quarter of India's total workforce. Furthermore, the secondary industry contributes nearly a quarter of GDP. This business is the backbone of the Indian economy and will continue to grow and prosper.
3. Tertiary sector
The tertiary sector is referred to as the service sector. The service business creates services rather than finished items. Services (also known as "Intangible Products") include things like attention, direction, access, experience, and emotional labour.
The industry's tertiary sector is in charge of delivering services to both businesses and end-users.
Rather than changing physical objects, the focus is on people by interacting with them and providing customer service.
The service industry includes certain significant services that do not directly contribute to the creation of commodities.
Goods manufactured in the primary or secondary sectors, for example, would have to be carried by logistics before being sold in wholesale or retail shops. This sector includes all service businesses, such as IT services, consulting, and so on. This industry accounts for more than 59 per cent of India's overall GDP.
Individuals who provide personal services, such as teachers, physicians, and others.
What is GDP?
The value of final products and services generated in a country during a given year is referred to as GDP.
Simply said, the total production of any sector for a given year is equal to the value of final goods and services produced in that sector for that year.
And the country's Gross Domestic Product—GDP—is calculated as the sum of production in three sectors.
The Increasing Importance of Tertiary Sector in Indian Economy
The tertiary industry overtook the primary sector as India's largest producing sector in 2013-14.
In India, the tertiary sector has grown in importance for the following reasons:
Among the most important services for all people are hospitals and schools as well as post and telegraph services. There are many critical services that have been added as essential services in the list.
Services like transportation, trade, and storage increase along with agriculture and industry.
As people's incomes rise, they expect more services like dining out, travel, shopping, private hospitals, schools, and professional training.
Over the last decade, new information and communication technology-based services have become critical.
Organized and Unorganized Sectors
Primary, secondary, and tertiary sectors of the economy are the most common divisions.
These are further divided into organised and unorganised sectors based on employment conditions.
The organised sector is made up of businesses where the terms of employment are set and predictable.
As a result, people are assured of employment.
Small and dispersed units that the government does not control make up the unorganised sector; as a result, there are rules and regulations in place, but they are not obeyed.
Below are a few of the differences between the two:
Differences Between Organized Sector and Unorganized Sector
FAQs on Sectors of the Indian Economy: Explained
1. What are the three main sectors of the Indian economy as per the NCERT syllabus?
The Indian economy is broadly classified into three main sectors based on the nature of economic activities:
- Primary Sector: This sector involves activities that directly use natural resources. It forms the base for all other products.
- Secondary Sector: This sector includes industries where finished products are manufactured from natural materials produced in the primary sector.
- Tertiary Sector: Also known as the service sector, this sector provides services that support the primary and secondary sectors and also includes essential services for the population.
2. What types of activities are included in the primary sector? Provide some examples.
The primary sector is focused on the extraction and harvesting of natural products. The main activities included are agriculture, dairy, fishing, forestry, and mining. For example, growing crops like wheat, mining for coal, or catching fish are all primary sector activities because they depend entirely on natural resources.
3. What is the secondary sector, and why is it often called the industrial sector?
The secondary sector transforms raw materials from the primary sector into finished goods through manufacturing processes. It is called the industrial sector because it is dominated by industries and factories. For example, using cotton (a primary product) to make cloth or using iron ore (a primary product) to manufacture steel bars are activities of the secondary sector. This sector is crucial for adding value to natural products.
4. Explain the role and importance of the tertiary sector in India's economy.
The tertiary sector, or the service sector, does not produce goods but provides essential services. Its role is to support the primary and secondary sectors and cater to consumer needs. Key examples include:
- Services supporting production, like transportation, storage, and banking.
- Essential public services like hospitals, schools, and post offices.
- Modern services such as Information Technology (IT), communication, and tourism.
As of 2013-14, it has become the largest producing sector in India, contributing the most to the country's Gross Domestic Product (GDP).
5. How are the primary, secondary, and tertiary sectors interdependent? Explain with an example.
The three sectors of the economy are highly interdependent and work in a chain. Consider the example of a biscuit manufacturer:
- The primary sector grows wheat, the main raw material for biscuits.
- The secondary sector takes the wheat, processes it into flour, and manufactures biscuits in a factory.
- The tertiary sector then provides services like transportation to move the biscuits to warehouses, banking for financial transactions, and retail shops to sell them to consumers.
Without one sector, the others cannot function efficiently.
6. Why has the importance of the tertiary sector in India grown so significantly?
The tertiary sector's significant growth in India can be attributed to several factors:
- Rising Income Levels: As people's incomes increase, they demand more services like tourism, private schools, and restaurants.
- Development of Other Sectors: The growth of agriculture and industry creates a demand for support services like transport, trade, and storage.
- Basic Services: The government's responsibility to provide essential services like education, healthcare, and defence expands this sector.
- Information Technology Boom: The rise of new services based on information and communication technology has been a major driver of growth.
7. What is the key difference between the organised and unorganised sectors of the economy?
The primary difference lies in the conditions of employment and government regulation. The organised sector consists of enterprises where employment terms are fixed and regular, and employees are assured of work and benefits. These are registered by the government and follow its rules. In contrast, the unorganised sector comprises small, scattered units largely outside government control. Jobs here are often low-paid, irregular, and offer no job security or benefits.
8. What is disguised unemployment, and in which sector of the Indian economy is this phenomenon most common?
Disguised unemployment, also known as hidden unemployment, is a situation where more people are engaged in an activity than are necessary. Even if some are removed, production does not suffer. This phenomenon is most common in the primary sector, particularly in agriculture in India. For instance, if a small farm requires only three people to work on it, but five family members are employed, the two extra workers represent disguised unemployment. Their contribution to production is minimal or zero.
