EAST POINT SCHOOL

ECONOMICS STUDY NOTES

CLASS X
There are three sectors of indian economy.

1. Primary sector
2. Secondary sector
3. tertiary sector

Sectors of indian economy

 1. Primary sector

When we produce a good by exploiting natural resources, it is an

activity of the primary sector.
This is because it forms the base for all other products
that we subsequently make.
Cotton and milk are examples of primary sector.
Since most of the natural products we get are from agriculture,
dairy, fishing, forestry, this sector is also called agriculture and
related sector.

2. Secondary sector

The secondary sector covers activities in which natural

products are changed into other forms through ways of
manufacturing that we associate with industrial activity.
It is the next step after primary.
For example, using cotton fibre from the plant, we spin yarn
and weave cloth. Using sugarcane as a raw material, we make
sugar orgur.
Since this sector gradually became associated with the different
kinds of industries that came up, it is also called as industrial
sector.

3. Tertiary Sector

After primary and secondary, there is a third category of

activities that falls under tertiary sector and is different from
the above two.
These are 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 a
support for the production process.
 For example, goods that are produced in the primary or
secondary sector would need to be transported by trucks or
trains and then sold in wholesale and retail shops.

Transport, storage, communication, banking, trade are some

examples of tertiary activities. Since these activities generate
services rather than goods, the tertiary sector is also called the
service sector.

Service sector also includes some essential services that may not
directly help in the production of goods. For example, we require
teachers, doctors, and those who provide personal services such
as washermen, barbers, cobblers, lawyers, and people to do
administrative and accounting works.

GDP (Gross Domestic Product)

• 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.

Precaution While Calculating GDP

• Not every good (or service) that is produced and sold
needs to be counted.
• It makes sense only to include the final goods and services.
• Take, for instance, a farmer who sells wheat to a flour
mill for Rs 8 per kg.
• The mill grinds the wheat and sells the flour to a biscuit
company for Rs 10 per kg.
• The biscuit company uses the flour and things such as
sugar and oil to make four packets of biscuits.
• It sells biscuits in the market to the consumers for Rs 60
(Rs 15 per packet).
• Biscuits are the final goods, i.e., goods that reach the
consumers.

FINAL GOODS AND SERVICES

➢ In contrast to final goods, goods such as wheat and the

wheat flour in this example are intermediate goods.
➢ Intermediate goods are used up in producing final goods and
services.
➢ The value of final goods already includes the value of
all the intermediate goods that are used in making the
final good.
➢ Hence, the value of Rs 60 for the biscuits (final good)
already includes the value of flour (Rs 10).
➢ Similarly, the value of all other intermediate goods would
have been included.
➢ To count the value of the flour and wheat separately is
therefore not correct because then we would be
counting the value of the same things a number of
times. First as wheat, then as flour and finally as
biscuits.

Comparing the three 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. And 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.

In India, this big task of measuring GDP is undertaken by a

central government ministry. This Ministry, with the help of
various government departments of all the Indian states and
union territories, collects information relating to total volume of
goods and services and their prices and then estimates the GDP.

Rising Importance of the Tertiary Sector in

Production

In the year 2011-12, the tertiary sector has emerged as the

largest producing sector in India replacing the primary
sector.

Why is the tertiary sector becoming so important in India? There

could be several reasons.
➢ First,
1) In any country several 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 required.
2) These can be considered as basic services.
3) In a developing country the government too has to
take responsibility for the provision of these services.
Thus the number of institutions mentioned in para 1
have increased in number over time.
➢ Second,
1) The development of agriculture and industry
leads to the development of services such as
transport, trade, storage leading to growth in
Tertiary Sector.
2) Greater the development of the primary and secondary
sectors more would be the demand for Tertiary Sector
➢ Third,
1) As income levels rise especially in big cities, certain
sections of people start demanding many more
services like eating out, tourism, shopping, private
 hospitals, private schools, professional training etc.
2) This again leads to growth in Tertiary sector.
➢ Fourth,
1) Over the past decade or so, certain new services
such as those based on information and
communication technology have become important
and essential.

Underemployment

Underemployment is a hidden kind of unemployment. Each

one is doing some work but no one is fully employed. This is
the situation of underemployment, where people are
apparently working but all of them are made to work less than
their potential.

➢ For example, Suppose a land can be harvested by ten persons

effectively, but actually, 14 workers are engaged in similar kind of
a job, then the contribution by additional four persons will be
zero as they will contribute nothing to the level of output.
➢ The disguised unemployment is very much prevalent in
agriculture, where the population pressure is high, and the
job opportunities are few.

This kind of underemployment is hidden in contrast to someone

who does not have a job and is clearly visible as unemployed.
Hence, it is also called disguised unemployment.

This means that even if we remove a lot of people from

agricultural sector and provide them with proper work elsewhere,
agricultural production will not suffer.

Underemployment can be also seen in tertiary Sector . They may

spend the whole day but earn very little. They are doing this
work because they do not have better opportunities.
 Disguised unemployment

Creating More Employment

Along with water, we also need to provide cheap agricultural

credit to the farmers for farming to improve.
Identify, promote and locate industries and services in semi-
rural areas where a large number of people may be employed.
Opening a cold storage could give an opportunity for farmers to
store their products like potatoes and onions and sell them
when the price is good.
In villages near forest areas, we can start honey collection
centres where farmers can come and sell wild honey.
It is also possible to set up industries that process
vegetables and agricultural produce like potato, sweet
potato, rice, wheat, tomato, fruits, which can be sold in
outside markets.
This will provide employment in industries located in semi-
rural areas and not necessarily in large urban centres.
Planning Commission (now known as NITI Aayog) estimates that
nearly 20 lakh jobs can be created in the education sector alone.
 Similarly, if we are to improve the health situation, we need
many more doctors, nurses, health workers etc. to work in rural
areas.
Study by the Planning Commission says that if tourism as a
sector is improved, every year we can give additional
employment to more than 35 lakh people.

These are some ways by which we can create more employment.

GOVERNMENT POLICIES TO PROMOTE

EMPLOYMENT

1) Banks can provide a loan to construct wells to irrigate their

lands.
2) Dam construction will provide employment opportunities as
well as irrigation facilities.
3) Better rural roads and more transportation facilities to
be provided to farmers to sell their crops.
4) On the credit of local banks, inputs like seeds, fertilisers,
agricultural equipment can be bought.
5) Government can promote and locate industries in the semi-
rural areas to generate employment.
6) Mills like–Dal mill, cold storage, honey collection centres,
processing of vegetables etc.
7) Employment can be generated in tourism, regional craft
industry or new services like IT.
8) More schools will lead to employment to teachers, builders,
peons and other staff.
9) For improving health situation, more doctors, nurses,
health workers are needed to work in rural areas.
 MGNREGA 2005

The central government in India made a law implementing the

Right to Work in about 625 districts of India.
It is called Mahatma Gandhi National Rural Employment
Guarantee Act 2005 (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
Organised sector covers those enterprises or places of work
where the terms of employment are regular and therefore,
people have assured work. They are registered by the
government and have to follow its rules and regulations which
are given in various laws such as the Factories Act, Minimum
Wages Act, Payment of Gratuity Act, Shops and
Establishments Act etc.
It is called organised because it has some formal processes and
procedures. Some of these people may not be employed by
anyone but may work on their own but they too have to
register themselves with the government and follow the rules
and regulations.
Workers in the organised sector enjoy security of
employment. They are expected to work only a fixed
 number of hours.
If they work more, they have to be paid overtime by the
employer. They also get several other benefits from the
employers.
They get paid leave, payment during holidays, provident fund,
gratuity etc.
They are supposed to get medical benefits and, under the
laws, the factory manager has to ensure facilities like drinking
water and a safe working environment.
When they retire, these workers get pensions as well.

Unorganised Sector
The unorganised sector is characterised by small and
scattered units which are largely outside the control of the
government.
There are rules and regulations but these are not followed. Jobs
here are low-paid and often not regular.
There is no provision for overtime, paid leave, holidays,
leave due to sickness etc.
Employment is not secure. People can be asked to leave
without any reason. When there is less work, such as during
some seasons, some people may be asked to leave. A lot also
depends on the whims of the employer.
This sector includes a large number of people who are
employed on their own doing small jobs such as selling on the
street or doing repair work. Similarly, farmers work on their
own and hire labourers as
and when they require.

How to Protect Workers in the

Unorganised Sector?
 In the rural areas, the unorganised sector mostly comprises of
landless agricultural labourers, small and marginal farmers,
sharecroppers and artisans (such as weavers, blacksmiths,
carpenters and goldsmiths).

In the urban areas, unorganised sector comprises mainly of

workers in small-scale industry, casual workers in construction,
trade and transport etc., and those who work as street vendors,
head load workers, garment makers, rag pickers etc.

We also find that majority of workers from scheduled castes,

tribes and backward communities find themselves in the
unorganised sector.

Sectors in terms of ownership: Public and

Private Sectors

There are two sectors in the term of ownership:-

1. Public sector
2. Private sector

1. Public sector

In this sectors the assets are owned and services are provided by government.
e.g. Railways, Post offices, defense, construction of roads, bridges, generating
electricity, providing irrigation through dams etc.
The purpose of public sector is not just to earn profits but to enables services at
reasonable cost so that any individual can take benefit of it.
There are things or services that a private sector could not provide at reasonable
cost because producing these services may need huge money that may be beyond
the capacity of the private sector. Thus government undertake such a huge
spendings.

2. Private sector

In this sector the assets are owned and services are delivered by private
individuals or companies.
E.g. Tata Iron and Steel Company Limited (TISCO) or Reliance Industries
Limited (RIL)
The main motive of private sector organisations is to earn profits.
Peoples who use services offered by private sectors need to pay money in turn.