SECTORS OF THE INDIAN ECONOMY People are engaged in various economic activities. Some of these are activities producing goods. Some others are producing services. These activities happening around us can be grouped or classify using some important criterion. These groups are also called sectors. Based on production criteria Primary Sector 1. When we produce a good by exploiting natural resources, it is an activity of the primary sector. 2. It is called primary sector because it forms the base for all other products that we subsequently make. 3. Since most of the natural products we get are from agriculture, dairy, fishing, forestry, this sector is also called agriculture and related sector. For example, 1. The cultivation of cotton. It takes place within a crop season. For the growth of the cotton plant, we depend mainly, but not entirely, on natural factors like rainfall, sunshine and climate. The product of this activity, cotton, is a natural product. 2. In the case of an activity like dairy, we are dependent on the biological process of the animals and availability of fodder etc. The product here, milk, also is a natural product. Similarly, minerals and ores are also natural products. Secondary Sector 1. The secondary sector covers activities in which natural products are changed into other forms through ways of manufacturing that we associate with industrial activity. 2. It is the next step after primary. 3. The product is not produced by nature but has to be made and therefore some process of manufacturing is essential. This could be in a factory, a workshop or at home. 4. Since this sector gradually became associated with the different kinds of industries that came up, it is also called as industrial sector. For example, 5. Using cotton fibre from the plant, we spin yarn and weave cloth. Using sugarcane as a raw material, we make sugar or gur. We convert earth into bricks and use bricks to make houses and buildings Tertiary sector 1. These are activities that help in the development of the primary and secondary sectors. 2. These activities, by themselves, do not produce a good but they are an aid or a support for the production process. 3. Since these activities generate services rather than goods, the tertiary sector is also called the service sector. For example, 1. 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. At times, it may be necessary to store these in godowns. 2. We also may need to talk to others over telephone or send letters (communication) or borrow money from banks (banking) to help production and trade. Transport, storage, communication, banking, trade are some examples of tertiary activities. 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. In recent times, certain new services based on information technology such as internet cafe, ATM booths, call centres, software companies etc have become important. How do we count the various goods and services and know the total production in each sector? 1. Economists suggest that the values of goods and services should be used rather than adding up the actual numbers. For example, if 10,000 kgs of wheat is sold at Rs 8 per kg, the value of wheat will be Rs 80,000. The value of 5000 coconuts at Rs 10 per coconut will be Rs 50,000. Similarly, the value of goods and services in the three sectors are calculated, and then added up. 2. 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. 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. 3. 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. Gross Domestic Product (GDP) 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, the mammoth task of measuring GDP is undertaken by a central government ministry. Historical Change in Sectors 1. Generally, it has been noted from the histories of many, now developed, countries that at initial stages of development, primary sector was the most important sector of economic activity. Most of the goods produced were natural products from the primary sector and most people were also employed in this sector. 2. Over a long time (more than hundred years), and especially because new methods of manufacturing were introduced, factories came up and started expanding. Secondary sector gradually became the most important in total production and employment. Hence, over time, a shift had taken place. 3. In the past 100 years, there has been a further shift from secondary to tertiary sector in developed countries. The service sector has become the most important in terms of total production. Most of the working people are also employed in the service sector. This is the general pattern observed in developed countries. PRIMARY, SECONDARY AND TERTIARY SECTORS IN INDIA Over the thirty years between 1973 and 2003, while production in all the three sectors has increased, it has increased the most in the tertiary sector. As a result, in the year 2003, 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 1. First, 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. These can be considered as basic services. In a developing country the government has to take responsibility for the provision of these services. 2. Second, the development of agriculture and industry leads to the development of services such as transport, trade, storage and the like, as we have already seen. Greater the development of the primary and secondary sectors, more would be the demand for such services. 3. Third, as income levels rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, professional training etc. You can see this change quite sharply in cities, especially in big cities. 4. Fourth, over the past decade or so, certain new services such as those based on information and communication technology have become important and essential. The production of these services has been rising rapidly. Problems in tertiary sector/service sector 1. All of the service sectors are not growing equally well. 2. Service sector in India employs many different kinds of people. At one end there are a limited number of services that employ highly skilled and educated workers. At the other end, there are a very large number of workers engaged in services such as small shopkeepers, repair persons, transport persons, etc. 3. 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. Share of Sectors in Employment A remarkable fact about India is that while there has been a change in the share of the three sectors in GDP, a similar shift has not taken place in employment. The primary sector is the largest employer even in the year 2000. Why didn’t a shift out of primary sector to others happen in case of employment? 1. It is because not enough jobs were created in the secondary and tertiary sectors. 2. Even though industrial output or the production of goods went up by eight times during the period, employment in the industry went up by only 2.5 times. 3. The same applies to tertiary sector as well. While production in the service sector rose by 11 times, employment in the service sector rose less than three times. 4. As a result, more than half of the workers in the country are working in the primary sector, mainly in agriculture, producing only a quarter of the GDP. 5. In contrast to this, the secondary and tertiary sectors produce three-fourth of the produce whereas they employ less than half the people. What it means is that there are more people in agriculture than is necessary. In other words, workers in agricultural sector are under -employed. Underemployment/ disguised unemployment When people are apparently working but all of them are made to work less than their potential, this is the situation of underemployment. 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. Underemployment in primary/agriculture sector More than half of the workers in the country are working in the primary sector, mainly in agriculture, producing only a quarter of the GDP. In contrast to this, the secondary and tertiary sectors produce three-fourth of the produce whereas they employ less than half the people. It means that there are more people in agriculture than is necessary. So, even if you move a few people out, production will not be affected. In other words, workers in agricultural sector are under - employed. Underemployment in secondary and tertiary sectors This underemployment can also happen in other sectors. For example there are thousands of casual workers in the service sector in urban areas who search for daily employment. They are employed as painters, plumbers, repair persons and others doing odd jobs. Many of them don’t find work every day. Similarly, we see other people of the service sector on the street pushing a cart or selling something where they may spend the whole day but earn very little. They are doing this work because they do not have better opportunities. How to create more important? 1. The government can spend some money or banks can provide a loan, to construct wells for irrigation. Small peasant will then be able to irrigate their land and take a second crop, which can provide employment to two people for more days. 2. Construction of new dams and canals to irrigate many farms could lead to a lot of employment generation within the agricultural sector itself reducing the problem of underemployment. 3. If the government invests some money in transportation and storage of crops, or makes better rural roads so that mini-trucks reach everywhere several farmers can continue to grow and sell their crops. This activity can provide productive employment to not just farmers but also others such as those in services like transport or trade. 4. Cheap agricultural credit can be provided to the farmers for farming to improve. 5. Another way by which we can tackle this problem is to identify, promote and locate industries and services in semi-rural areas where a large number of people may be employed. 6. 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. 7. In villages near forest areas, we can start honey collection centres where farmers can come and sell wild honey. 8. 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. Employment in other sectors 1. Education: A lot of children in our country are not attending schools, they may be at home or many of them may be working as child labourers. If these children are to attend schools, we will require more buildings, more teachers and other staff. A study conducted by the Planning Commission estimates that nearly 20 lakh jobs can be created in the education sector alone. 2. Health: Similarly, if we are to improve the health situation, we need many more doctors, nurses, health workers etc. to work in rural areas. These are some ways by which jobs would be created. 3. Tourism: Every state or region has potential for increasing the income and employment for people in that area. It could be tourism, or regional craft industry, or new services like IT. The same 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. National Rural Employment Guarantee Act 2005 (NREGA 2005) The central government in India recently made a law implementing the Right to Work in 200 districts of India. It is called National Rural Employment Guarantee Act 2005 (NREGA 2005). Under NREGA 2005, all those who are able to, and are in need of, work 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. The types of work that would in future help to increase the production from land will be given preference under the Act. DIVISION OF SECTORS AS ORGANISED AND UNORGANISED Organised sector 1. Organised sector covers those enterprises or places of work where the terms of employment are regular and therefore, people have assured work. 2. 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. 3. It is called organised because it has some formal processes and procedures. 4. 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. 5. Workers in the organised sector enjoy security of employment. 6. They are expected to work only a fixed number of hours. If they work more, they have to be paid overtime by the employer. 7. 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 1. The unorganised sector is characterised by small and scattered units which are largely outside the control of the government. 2. There are rules and regulations but these are not followed. 3. Jobs here are low-paid and often not regular. There is no provision for overtime, paid leave, holidays, leave due to sickness etc. 4. 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. 5. 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. 6. Similarly, farmers work on their own and hire labourers as and when they require. How to Protect Workers in the Unorganised Sector? 1. Farmers need to be supported through adequate facility for timely delivery of seeds, agricultural inputs, credit, storage facilities and marketing outlets. 2. Small-scale industry also needs government’s support for procuring raw material and marketing of output. 3. The casual workers in both rural and urban areas need to be protected. 4. Workers from scheduled castes, tribes and backward communities also face social discrimination. Protection and support to the unorganised sector workers is thus necessary for both economic and social development. SECTORS IN TERMS OF OWNERSHIP: PUBLIC AND PRIVATE SECTORS Another way of classifying economic activities into sectors could be on the basis of who owns assets and is responsible for the delivery of services. Public Sector 1. In the public sector, the government owns most of the assets and provides all the services. 2. Railways or post office is an example of the public sector. 3. The purpose of the public sector is not just to earn profits. Governments raise money through taxes and other ways to meet expenses on the services rendered by it. Private Sector 1. In the private sector, ownership of assets and delivery of services is in the hands of private individuals or companies. 2. Companies like Tata Iron and Steel Company Limited (TISCO) or Reliance Industries Limited (RIL) are privately owned. Activities in the private sector are guided by the motive to earn profits. 3. To get such services we have to pay money to these individuals and companies. Why do governments spend on public sector? 1. There are several things needed by the society as a whole but which the private sector will not provide at a reasonable cost because some of these need spending large sums of money, which is beyond the capacity of the private sector. 2. Also, collecting money from thousands of people who use these facilities is not easy. 3. Even if they do provide these things they would charge a high rate for their use. Examples are construction of roads, bridges, railways, harbours, generating electricity, providing irrigation through dams etc. 4. Thus, governments have to undertake such heavy spending and ensure that these facilities are available for everyone. 5. The government has to support and encourage the private sector to continue their production or business. Government here steps in by producing and supplying electricity at rates which these industries can afford. Government has to bear part of the cost. 6. Similarly, the Government in India buys wheat and rice from farmers at a ‘fair price’. This it stores in its godowns and sells at a lower price to consumers through ration shops. 7. The government must spend on its responsibilities such as providing health and education facilities for all. Running proper schools and providing quality education, particularly elementary education, is the duty of the government. 8. Government also needs to pay attention to aspects of human development such as availability of safe drinking water, housing facilities for the poor and food and nutrition. 9. It is also the duty of the government to take care of the poorest and most ignored regions of the country through increased spending in such areas.
Posted on: Thu, 13 Jun 2013 17:38:29 +0000
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