Class 10 Economics - Chapter 2 Sectors of the Indian Economy

Introduction to Economic Sectors

An economy is understood by studying its sectors, which are classified based on specific criteria. This chapter discusses three classifications: primary/secondary/tertiary, organised/unorganised, and public/private. Key concepts include:

• Gross Domestic Product (GDP): Total value of final goods and services produced in a country in a year.
• Gross Value Added (GVA): Measures sectoral contributions after adjusting for taxes and subsidies.
• Employment: Number of people working in each sector.

Sectors of Economic Activities

Primary Sector

Involves activities that directly use natural resources:

• Examples: Agriculture (cotton cultivation), dairy (milk production), fishing, forestry, mining.
• Why Primary? Forms the base for other products, often called the agriculture and related sector.

Secondary Sector

Involves manufacturing natural products into other forms:

• Examples: Spinning cotton into yarn, making sugar from sugarcane, producing bricks from earth.
• Characteristics: Requires industrial processes in factories, workshops, or homes; also called the industrial sector.

Tertiary Sector

Provides services that support primary and secondary sectors or meet societal needs:

• Examples: Transport, banking, trade, storage, communication, education, healthcare, IT services (e.g., call centres).
• Characteristics: Does not produce goods; called the service sector.

Interdependence

Sectors are highly interdependent (Table 2.1):

Example	What Does This Show?
Farmers refuse to sell sugarcane to a sugar mill.	Secondary sector (sugar mill) depends on primary sector (sugarcane).
Companies import cotton, reducing demand for Indian cotton.	Primary sector (cotton farmers) depends on secondary sector (textile companies).
Rising fertiliser prices increase farmers’ costs.	Primary sector depends on secondary sector (fertiliser production).
Transporters strike, stopping vegetable supply to cities.	Primary sector (farmers) depends on tertiary sector (transport).

Comparing the Three Sectors

Measuring Production

Total production is measured by the value of final goods and services to avoid double-counting intermediate goods:

• Example: Wheat (Rs 20/kg) sold to a mill becomes flour (Rs 25/kg), then biscuits (Rs 80). Only biscuits (final good) are counted in GDP.
• GDP: Sum of final goods and services produced in a year, calculated by a central ministry in India.
• GVA: Measures sectoral contributions, adjusted for taxes and subsidies.

Historical Changes

Developed countries show a shift:

• Initial Stage: Primary sector dominates (agriculture).
• Later Stage: Secondary sector grows with industrialization.
• Modern Stage: Tertiary sector becomes dominant (services).

Why Tertiary Sector Growth?

• Basic Services: Government provides hospitals, schools, banks, etc.
• Agriculture/Industry Growth: Increases demand for transport, trade, storage.
• Rising Incomes: Demand for private schools, tourism, dining out.
• IT Services: Growth in call centres, software companies.

Underemployment and Employment Creation

Underemployment

Definition: People work less than their potential (disguised unemployment).

• Rural Example: A family of five works on a small farm, but only two are needed, dividing labour inefficiently.
• Urban Example: Casual workers (e.g., painters, plumbers) often find work only sporadically.

Issue: Over half of India’s workers are in agriculture, producing only ~16% of GVA, indicating surplus labour.

Creating Employment

• Agriculture: Irrigation (wells, canals) allows second crops, employing more people (e.g., 50 days/ha for wheat).
• Infrastructure: Better roads, storage, and transport enable farmers to sell produce, creating jobs in trade.
• Credit: Low-interest loans for seeds, equipment reduce debt and improve productivity.
• Semi-Rural Industries: Dal mills, cold storage, honey collection centres, vegetable processing units.
• Education/Health: Building schools and hospitals creates jobs (e.g., 20 lakh jobs in education).
• Tourism/Crafts: Promoting regional tourism or crafts can employ millions.
• MGNREGA 2005: Guarantees 100 days of rural employment, prioritizing productive work (e.g., irrigation projects).

Organised vs. Unorganised Sectors

Organised Sector

Characteristics:

• Regular, secure jobs with fixed hours.
• Government-registered enterprises follow laws (e.g., Minimum Wages Act).
• Benefits: Paid leave, overtime pay, provident fund, medical facilities, pensions.
• Example: Kanta, an office worker with a fixed salary and holidays.

Unorganised Sector

Characteristics:

• Small, scattered units, often unregulated.
• Low-paid, irregular jobs with no benefits or job security.
• Example: Kamal, a daily wage labourer with no leave or formal contract.

Key Points:

• ~99% of primary sector workers (231/232) are in the unorganised sector.
• 83% of India’s workers are in the unorganised sector, with only 17% in the organised sector.

Protecting Unorganised Workers

Vulnerable Groups:

• Rural: Landless labourers, small farmers, artisans (weavers, carpenters).
• Urban: Casual workers, street vendors, rag pickers.
• Marginalized: Scheduled castes, tribes, backward communities face discrimination.

Issues: Low wages, exploitation, no job security, unsafe conditions.

Solutions:

• Support small farmers with seeds, credit, storage, and marketing.
• Regulate small-scale industries for fair wages and safety.
• Enforce labour laws to protect casual workers.

Public vs. Private Sectors

Public Sector

Characteristics:

• Government-owned, focused on public welfare, not just profits.
• Funded by taxes to provide affordable services.
• Examples: Railways, post offices, public schools, ration shops.

Role:

• Provides essential services (roads, dams, electricity) that private sector may not afford.
• Subsidizes industries (e.g., cheap electricity) and agriculture (e.g., fair price for wheat).
• Ensures human development (health, education, housing, nutrition).

Private Sector

Characteristics:

• Privately owned, profit-driven.
• Charges for services based on market rates.
• Examples: Tata Steel, Reliance Industries.

Contribution to Development

• Public Sector: Reduces inequality by providing affordable services, supports vulnerable regions.
• Private Sector: Drives innovation and efficiency but may prioritize profits over social good.

Key Terms

• GDP: Value of all final goods and services produced in a year.
• GVA: Sectoral contribution adjusted for taxes and subsidies.
• Underemployment: Working less than potential (disguised unemployment).
• Organised Sector: Regular, secure jobs with benefits, regulated by government.
• Unorganised Sector: Irregular, low-paid jobs with no benefits, largely unregulated.
• Public Sector: Government-owned, welfare-focused.
• Private Sector: Privately owned, profit-driven.
• MGNREGA 2005: Guarantees 100 days of rural employment.

Exercises and Activities

Fill in the Blanks

• (i) Employment in the service sector has not increased to the same extent as production.
• (ii) Workers in the tertiary sector do not produce goods.
• (iii) Most workers in the organised sector enjoy job security.
• (iv) A large proportion of labourers in India are in the unorganised sector.
• (v) Cotton is a natural product, and cloth is a manufactured product.
• (vi) Activities in primary, secondary, and tertiary sectors are interdependent.

Multiple Choice Questions

• (a) Public vs. Private: (iii) Ownership of enterprises.
• (b) Primary Sector: (i) Primary.
• (c) GDP: (ii) All final goods and services.
• (d) Tertiary GVA (2017-18): (iii) 50 to 60%.

Matching (Farming Problems)

Problem	Measure
Unirrigated land	(d) Construction of canals
Low prices for crops	(c) Procurement by government
Debt burden	(e) Low-interest credit
No job in off-season	(a) Agro-based mills
Forced sales to local traders	(b) Cooperative marketing

Short Answer Questions

• 6. Usefulness of Classification: Organizes complex activities for analysis; e.g., primary/secondary/tertiary shows sectoral shifts.
• 7. Focus on Employment/GVA: Measures economic contribution and job creation. Other issues: Worker welfare, environmental impact.
• 9. Tertiary Sector Difference: Provides services, not goods (e.g., banking vs. farming).
• 10. Disguised Unemployment: Rural: Family overworks small farm. Urban: Vendor earns little despite long hours.
• 11. Open vs. Disguised Unemployment: Open: No job. Disguised: Working but underutilized.
• 12. Tertiary Sector Role: Disagree. Contributes ~55% to GVA, supports other sectors.
• 13. Two Kinds of Workers: High-skilled (e.g., IT professionals) and low-skilled (e.g., vendors).
• 14. Exploitation in Unorganised Sector: Agree. Low wages, no security (e.g., casual workers).