Sectoral Aspects of Indian Economy MODULE - 7

Indian Economy

20
Notes

SECTORAL ASPECTS OF
INDIAN ECONOMY
We consume various types of goods and services. They can be classified into two types-
(i) food items and (ii) non-food items. To make food we need food grains, fruits and
vegetables, edible oil etc. These things are produced by farmers in the rural area. There
are countless non-food items which we use, such as, clothes, shoes, furniture, utensils,
automobiles, pen, paper, book etc. These are produced by industries in towns and
cities. Since production of food grains and production of non-food items take place in
different environment we classify them as different sectors of the economy.

OBJECTIVE
After completing this lesson, you will be able to:
 know the three major sectors of Indian economy which the households pursue
to earn their living;

 understand the role and importance of each of these sectors in the economy;

 know the linkages among these sectors.

20.1 TYPES OF OCCUPATION PEOPLE PURSUE

To earn livelihood people pursue different types of activities based on their education,
skill, family tradition etc. Normally we classify them into three different sectors of the
economy, such as (i) primary sector, (ii) secondary sector and (iii) tertiary sector.

20.1.1 Primary Sector

Take the scenario in rural areas of India. How do the people, who are living in villages,
earn their livelihood? Many of them work on the fields to raise crops, which is known

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as cultivation. They are known as farmers and agricultural labourers and the occupation
is called agriculture. There are different types of crops which are cultivated; such as food
items and non food items. Food items include cereal, pulses, fruits and vegetables etc.
and non-food items include cotton, jute etc.

Notes Similarly people also earn their livelihood from forestry which refers to collection of
forest products and selling them in the market. This occupation is called forestry. Forest
products include- timber, firewood, herbal medicines etc. Many people work in mining
area to extract minerals. There also people who are engaged in raising live stock such
as poultry and dairy farming. Finally fishery is another occupation in which people catch
fish in ponds, rivers or sea to sell them in the market. All these activities i.e. agriculture,
forestry, mining, livestock and fishery are complementary to each other. We classify
them as primary production and place them in primary sector.

So primary sector of our economy includes the following.

(i) Agriculture and allied activities

(ii) Fishery

(iiii) Forestry

(iv) Mining and Quarrying

Villages have been existing from ancient days in India and agriculture and the allied
actives are very traditional occupation of people. It comes naturally to them because
food which comes from agriculture is the basic need of life. But with progress of time
human settlements have expanded beyond villages. Towns and cities have come up in
the process of development. These are called urban areas. Jaipur, Ahmedabad, Pune,
Bhubaneswar etc. are examples of cities in India. Delhi, Chennai, Mumbai and Kolkata
are called Metros because they are even bigger cities. These urban areas are known for
its non-agricultural occupation. We can divide the non agricultural activities into two
sectors.
(i) Secondary Sector
(ii) Tertiary sector

20.1.2 Secondary Sector

This sector includes the following production activities

(a) Manufacturing

(b) Construction

(c) Gas, water and electricity supply

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Manufacturing
This implies production of goods by using raw materials in manufacturing units called
factories and industries. In terms of size and expenditure involved there are small and
large scale industries. Examples of small scale units are: shoe factory, textile unit,
printing, glass making, furniture etc. The large scale manufacturing includes steel, Notes
automobiles, aluminum, etc. Skilled people work in manufacturing business.

Construction
This activity includes construction of residential and non-residential buildings, roads,
parks, bridges, dams, airports, bus stops and so on. It is a regular activity seen in urban
areas.

Another occupation people pursue in secondary sector is gas, water and electricity
supply. These are essential services.

ACTIVITY

(i) Visit a poultry farm and note down the products it sells.
(ii) Make a list of five forest products and note down their prices.

20.1.3 Tertiary Sector

People are also engaged in tertiary sector activities which are different in nature.

This sector is called service sector where following services are provided.

(i) Trade, Hotels and Restaurants

(ii) Transport, Storage and Communication

(iii) Financial services such as Banking, Insurance etc.

(iv) Real estate and Business services

(v) PublicAdministration

(vi) Others services.

Table 20.1 provides the percentage of working population in the above mentioned
different sub sectors for the year 2009-10.

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Table 20.1 Occupational Distribution of working Population
in India (percentage) in 2009-10

(i) Agriculture 50.19

(ii) Mining and quarrying 0.61
Notes
(iii) Manufacturing 13.33
(iv) Electricity, water etc 0.33
(v) Construction 6.10
(vi) Trade, Hotels etc. 13.18
(vii) Transport, storage etc 5.06
(viii) Financial, business services etc. 2.22
(ix) Other services etc. 8.97

Source: Economic Survey

INTEXT QUESTIONS 20.1

(i) Which of the following is a part of primary sector?

(a) Fishery (b) electricity (c) banking

(ii) Which is the largest sector in terms of share in working population in India?

ACTIVITY
Visit three households in your neighborhood and ask them about their occupation. Then
categorize their occupation into different sectors.

Since people work in various activities under the above mentioned sectors and earn
income we can analyses the contribution of these sectors to national product as well as
their role and importance in the economy.

20.2 ROLE AND IMPORTANCE OF PRIMARY SECTOR

In the primary sector agriculture is the predominance occupation and has the largest
share in national income. So let us concentrate on the role and importance of agriculture

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in the Indian economy in terms of its share in the national income, providing employment
food and raw materials. Let us take them one by one.

1. Share in National income

At the time of independence agriculture was contributing more than 50 percent to

Notes
national income. In recent years its share has come down. In 2009-10 agriculture
contributed around 15 percent to national income.

2. Providing employment to largest section of population

Agriculture is the mainstay of Indian economy. It is the occupation of the largest section
of India’s population. At the time of independence about 70 percent of our population
depended on agriculture and allied activities to earn their livelihood. With development
of manufacturing and service sector dependency on agriculture has slightly reduced.
About 50 percent of India’s population was working in agriculture in the year 2009-10.

3. Providing Food to Millions

Food is the most basic requirement of life. Without agriculture food production and
supply would be non-existent. India’s food requirement is not only very high but also
increasing every year because of increase in its population. The total food grain
production of India in 2008-9 was around 234 million tonnes. This includes wheat, rice
and pulses.

4. Providing raw materials to industries

Industries such as sugar, jute, cotton textiles, vanaspati etc. get their raw materials from
agriculture. Do you know how paper is made? It requires a special type of grass,
bamboo etc. Without agriculture paper production is not possible. Look at the food
processing industry which is supplying so many different varieties of packed food items
such as pickles, fruit jam, juice, biscuits, bread, semi –prepared food etc. Food
processing industry is operating because of agriculture only.

INTEXT QUESTIONS 20.2

1. How much was the food grain production of India in 2008-09?

2. Give three examples of products from food processing industry?

3. What was the share of agriculture in National income at the time of independence?

4. How much has agriculture contributed to India’s income in 2009-10?

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20.3 ROLE AND IMPORTANCE OF SECONDARY
SECTOR
In the secondary sector manufacturing industries form the major part. These industries
are categorized into small scale industry and large industry.
Notes
What is a small scale industry? An industry which can be established by spending a
minimum of Rs. 25 lakh on plants and machinery is called a small scale industry. These
industries mostly use labour-intensive technology. i.e. production process of these
industries use more labour force. Large scale industry, on the other hand needs huge
amount of investment in the form of plant and machinery. It is also physically spread over
many acres of land and employs large number of people. It also uses capital intensive
technology in the form of big machines. Take for example an iron and steel plant. The
Tata Iron and steel plant is the oldest in the country. It is situated in Jamshedpur over
an area of about 37.31 km. square of land.

The importance of Industrial sector, both small and large, has been increasing after
independence. Let us discuss them one by one.

(i) Share in national income

The contribution of industrial sector has been increasing slowly over time after
independence. In 2009-10 the share of this sector was 28 percent in India’s domestic
product. At the time of independence it was only 14 percent. The increase is due to
increase in number of manufacturing units and increase in industrial production.

(ii) Employment generation

Industrial sector has also largely contributed to providing employment opportunities to
India’s population. Nearly 3 crores 30 lakhs people are engaged in both small and large
scale industries combined. Out of this small industries provide nearly 3 crore 12 lakh
jobs.

(iii) Creation of Infrastructure

Today it has become easier to travel to distant places because of existence of roads,
highways, railways, airways. Think of the big Dam projects such as Hirakud and
Bhakra-Nangal which provide electricity and irrigation. Look at the big buildings which
accommodate offices, shopping centers, factories, institutions etc. and provide residences.
Also see the Radio and Telephone towers which facilitate communication. These are all
part of infrastructure. You can imagine, how impossible will it be to live without these
facilities today? Infrastructure building is possible because of contribution of large scale
industries which make the machinery and equipments needed build infrastructure.

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(iv) Provision of consumer goods
The clothes you wear, the pen, the tooth brush, soap, shoes, cycle, scooter, car etc. you
use are produced by manufacturing industries. Today the market is flooded with many
goods of your choice. This is possible because of industrialization.
Notes

INTEXT QUESTIONS 20.3

1. Define small scale industry?
2. What was the share of industrial sector in national income in 2009-10?
3. Give two examples of infrastructure?

20.4 ROLE AND IMPORTANCE OF SERVICE SECTOR

Service sector of India has been expanding and growing very fast. Look around and you
will see that number of trains carrying people as well as goods have increased
significantly. You also find so many buses, cars and trucks moving on the roads from one
place to another. This means that the transport services have grown over time. More
number of people are having telephones including mobile phones. More number of
schools have been built in the country to provide education. The number of study centers
under open schooling has increased so that more students can be benefitted. You can
also find hospitals; health centers etc are providing health services to people. Banks
have also opened their branches so that people can open their account, withdraw money
they want and take loans to purchase house, car, scooter etc. There are hotels and
restaurants in almost all public places to provide food to people. These are examples
of different types of services. It is difficult to think life in the economy without services.
Hence it is important to know the role and importance of service sector which we will
discuss below under the following heads.
(i) Contribution of service sector to National income.
(ii) Contribution of service sector in providing employment
(iii) Attracting funds from foreign countries.
(iv) Contribution of service sector in Exports.

ACTIVITY
Prepare a project on your local “transport service” in about 200 words.

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20.5 CONTRIBUTION OF SERVICE SECTOR

(i) Contribution to National Income

Among all the three sectors i.e. agriculture, industry and service, it is the service sector
Notes that has contributed maximum to the national income of India. If India’s income is 100,
then service sector contributed 55.20 in the year 2009-10 which is more than half of
the total. We have presented the share of different services in table 20.2 below.

Table 20.2 Contribution of services sector in GDP (2009-10)

Trade, Hotels etc. 16.3

Transport, Communication 7.8
Finance, real estate, business 16.7
Community, social and others 14.4
Total service sector 55.2

Source: Economic Survey

You can see that financial, real estate and business services contributed 16.7 percent
out of the total 55.2. Financial services include Banking and Insurance. Trade and hotel
services contributed 16.3 percent. Community and social services which include public
administration, defense etc. has contributed 14.4 percent while transport and
communication contributed 7.8 percent to national income.

(ii) Contribution to Employment

Now a days more and more people are getting employment in service sector. Out of
total employment level in the country, this sector has absorbed 29.4 percent of them in
2009-10. In times to come this figure is going to increase further. The main reason is that
the number of educated people in India is increasing every year. They belong to various
fields such as matriculates, graduates in arts, commerce, science, engineering, medicine
and other professional and vocational streams. Service sector needs these people. In
terms of wages and salaries, service sector, pays more than that of agricultural sector.
Compared to agriculture, service sector provides more job opportunities. There is
existence of large varieties of services which are provided round the year. But there are
some seasonal activities in agriculture. So as people become more educated they move
to service sector. So employment in service sector is increasing.

(iii) Attracting Funds from Foreign Countries

Looking at the growth of service sector of India people from foreign countries are
showing more interest to invest money in this sector to earn profit. Banking, insurance,

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trade, transport, hotel services combined have attracted more than 1lac 18 thousand
crores rupees from foreign countries in the form of direct investment. Recently computer
service has grown many fold in India. This has attracted more than forty seven thousand
crores of rupees from foreign countries. If investments are made then more job
opportunities are created. This is advantageous for the nation.
Notes
(iii) Contribution of Service Sector to Exports
Exporting means selling goods and services to citizens in foreign countries to earn foreign
exchange in the form of dollar, euro, yen, pound etc. In recent years India’s service
sector has contributed a lot in earning foreign exchange for the country through exports.
Our business services which include – IT, consultancy, legal services, etc. have become
world standard .
In the year 2009-10 India earned nearly 4.35 lakh crores of rupees from exports in
services.

INTEXT QUESTIONS 20.4

1. What was the share of service sector in employment in 2009-10?
2. What was the share of service sector in national income of India in 2009-10?

20.6 LINKAGES AMONG THE THREE SECTORS OF

THE ECONOMY
All the three sectors are interlinked. In fact they complement and supplement each other.
We give you the following story to understand it.

Hari Singh is a farmer who cultivates wheat on his agricultural land in the village Rampur.
Last year he had a good harvest due to good rain fall. So he could sell 10 quintals of
wheat in the local mandi and keep another 10 quintals for his household consumption.
This year there is no proper rainfall. The area is also having no irrigation facility. Then
how to provide water to the wheat crop ? Hari Singh decided to lift ground water. But
for this he needs a diesel pump set. Who will provide a diesel pump set? It is produced
by a manufacturing unit called Ravi manufacturers which is situated 200km away in an
industrial area called Karim Nagar. Now going to such distant place is a difficult task.
Ganga Singh, a friend of Hari Singh told that there is no need to worry. He took Hari
Singh to the nearest township market called Shiv Mandi. In the market complex there
is a shop called Pappu Hardware Store run by Ganga’s brother-in-law named Pappu
who sells pump sets. When Hari Singh asked for the pump set Pappu told him to wait
for two hours because the truck carrying 50 Ravi pump sets and some spare parts for

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tractors from Karim Nagar would reach his shop by that time. Pappu also talked to Ravi
Khetrapal, who is the owner of Ravi pumps, over his mobile phone to confirm this. In
the mean time Ganga and Hari took tea and snacks in the tea stall, went to enquire about
admission into primary schooling for Hari’s little daughter and brought medicines from
the health center for Ganga’s son who was having fever at home.After two hours when
Notes they came back to Pappu’s shop they saw labourers unloading the pumpsets. Pappu
told them that he had ordered 50 pumps from the factory in Karim Nagar. The truck
would deliver the spare parts to another shop in the same market place which sells auto
and tractor parts. Hari saw that Pappu gave a cheque of Rs.100, 000 to the truck driver
who received it on behalf of Ravi Khetrapal. “ Since the amount is big, it is not safe to
give cash. Cheque is a better option. Mr. Khetrapal can deposit the cheque in his bank
account to get the money” Pappu said. He further said that this payment was made to
settle some earlier dues. The payment for pumps would be made after he sells the pumps
to the customers in the similar way. Hari Singh paid Rs. 7000 to Pappu and bought one
pump set. “Due to bad monsoon this year pump sets are in great demand and will be
sold quickly” said Pappu confidently. “What about the truck now?” asked Hari while
returning back to village with Ganga Singh. “The truck will now carry wheat and
vegetables from the mandi which would be sold to households in the Karim Nagar
industrial area and township” replied Ganga.

From the story above you can easily establish the link between the agriculture, industry
and service sectors. Like Hari Singh there are many farmers in the agricultural sector
who need diesel pumps to irrigate their land. Besides pumps there are many other inputs
such as fertilizer, pesticides, plough, tractor etc. are required for cultivation. These things
are supplied by industry in the same way as the pump in the story. In return people
working in industries and services get food supplied by the agricultural sector in the same
way as Hari Singh had sold his surplus wheat in the mandi. What is role of service sector
then? Its role is to facilitate and ensure these transactions between agriculture and
industry. In the story the truck carrying pumps and spare parts from Karim Nagar to Shiv
Mandi and food items on its journey back is a part of transport service. Use of mobile
phone to keep track of the order as part of communication services. Cheque deposit
in the bank is part of financial service. Pappu’s shop provides business service of
delivering the good. Note that all these activities are duly backed and supported by
money flow. Here in the story Hari Singh sold wheat and got money. He used the money
to buy a pump. Pappu got money from Hari and paid it back to supplier of pumps after
keeping his profit.After receiving the money the pump supplier will pay the truck driver
his due and give wages to people in the factory. These people will use the money to buy
food in the local market transported by the truck from mandi.

From this simple story, now you can imagine how the whole of the economy is linked
and connected internally.

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INTEXT QUESTIONS 20.5

1. Give one benefit of making payment by cheque?
2. “Transporting food grain” is a part of which sector? Notes

(a) agriculture (b) industry (c) service

ACTIVITY
Visit your local market and make a list of some services you get there. Also make a list
of five agricultural and industrial products you see there and find out their place of origin?

WHAT YOU HAVE LEARNT

 There are three sectors in the economy, namely, primary (agriculture and allied
activities), secondary, (manufacturing etc.) and tertiary (services).
 All these sectors contribute towards generation and growth of national income,
creation of employment opportunities, supply of goods and services and creating
infrastructure.
 All the three sectors are interlinked by complementing and supplementing each
other.

TERMINAL EXERCISE
1. Name the sub sectors of primary sector?
2. Name the sub sectors of secondary sector?
3. Name the sub sectors of tertiary sector?
4. Explain the role and importance of primary sector?
5. Explain the role and importance of secondary sector?
6. Explain the role and importance of tertiary sector?
7. How are the three sectors of the economy interrelated?

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ANSWERS TO INTEXT QUESTIONS

Intext Questions 20.1

Notes
1. (a)
2. Agriculture

Intext Questions 20.2

1. 234 million tonnes
2. bread, fruit jam and pickles
3. more than 50 percent
4. 15 percent

Intext Questions 20.3

1. An industry which can be established by spending a minimum of Rs 25 lakhs on
plants and machinery is called a small scale industry.
2. 28 percent
3. Telephone tower, Hirakud Dam

Intext Questions 20.4

1. 29.4 percent
2. 55.2 percent

Intext Questions 20.5

1. safety (reaches the person through bank amount)
2. service

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