SECTORS OF INDIAN ECONOMY

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Introduction to Indian Economy

• The Indian economy is a fascinating and diverse landscape, characterized by a combination of ancient traditions and modern development. As one of the world’s largest and fastest-growing economies, India holds a prominent place on the global stage. It is a nation with a rich history, vibrant culture, and a rapidly evolving economic landscape.
• India’s economic journey is marked by a blend of traditional practices, such as agriculture, and the dynamic growth of contemporary sectors like information technology and services. With a vast and diverse population, it faces unique challenges and opportunities, making it a subject of global interest.

Primary Sector

• The primary sector, often referred to as the agriculture sector, is the foundation of any economy. It includes activities directly connected with natural resources and the environment. This sector primarily involves the extraction and production of raw materials from the earth, plants, and animals. It’s where the journey of all goods begins. Key activities in the primary sector worldwide include farming, fishing, forestry, and mining.

Primary Sector:India

• Significant Employment: The Indian primary sector is a major source of employment. It employs a substantial portion of the country’s workforce, particularly in agriculture. Millions of people are engaged in farming, making it a vital livelihood option for a significant part of the population.
• Agricultural Dominance: Agriculture is the backbone of the Indian primary sector. India has diverse agro-climatic zones, allowing the cultivation of a wide variety of crops, from rice and wheat to sugarcane and cotton. This sector’s productivity and practices vary from region to region.
• Seasonal Nature: Agriculture in India is highly dependent on the monsoon season. The success of crops is tied to rainfall patterns, making it a seasonal and climate-sensitive endeavor. This can lead to fluctuations in agricultural output and income.
• Traditional Practices: Many agricultural practices in India are still traditional, passed down through generations. However, there is a growing shift towards modern farming techniques, including the use of technology and improved seeds.
• Subsistence Farming: A significant portion of Indian agriculture is subsistence farming, where farmers grow crops primarily for their family’s consumption. This reflects the need to ensure food security and self-sufficiency.
• Landholding Patterns: Landholding in India varies widely, from small and marginal farmers to large landowners. The unequal distribution of land is a notable feature of Indian agriculture.
• Livestock and Allied Activities: Alongside crop cultivation, livestock rearing, and allied activities are also an integral part of the primary sector. This includes dairy farming, animal husbandry, and related practices.
• Challenges and Modernization: The Indian primary sector faces challenges such as land fragmentation, lack of access to credit, and vulnerability to weather conditions. Efforts are being made to modernize agriculture through initiatives like ‘Pradhan Mantri Krishi Sinchayee Yojana’ to improve irrigation and ‘Krishi Vikas Yojana’ for overall agricultural development.
• Export of Agricultural Products: India is a significant exporter of agricultural products, including rice, spices, and textiles. The country’s primary sector contributes to its foreign exchange earnings through these exports.
• Sustainability and Environmental Concerns: Balancing the need for increased agricultural output with environmental sustainability is a growing concern. Sustainable practices and water management are areas of focus.

Secondary Sector

• The secondary sector, often known as the industrial sector, is a critical part of any economy. It involves the transformation of raw materials obtained from the primary sector into finished products. This sector is characterized by various forms of manufacturing and processing activities. It plays a vital role in the economic development of a country and is often associated with industrialization and the production of goods.

Secondary Sector:India

• Diverse Manufacturing: India’s secondary sector boasts a diverse manufacturing base, encompassing industries such as textiles, steel, automotive, electronics, and chemicals. The “Make in India” initiative has been launched to boost manufacturing and make India a global manufacturing hub.
• Contribution to GDP: The secondary sector is a significant contributor to India’s GDP. It reflects the growth and development of industries within the country. It plays a crucial role in generating income and employment for millions of people.
• Small-Scale Industries: India has a robust small-scale and cottage industry sector within the secondary sector. This sector includes small enterprises and home-based production units, contributing substantially to employment and regional development.
• Government Initiatives: To promote industrial growth, the Indian government has introduced various policies and incentives. Programs like ‘Atma Nirbhar Bharat’ and ‘Startup India’ aim to support entrepreneurship and innovation.
• Challenges and Modernization: The Indian secondary sector faces challenges such as infrastructural bottlenecks, regulatory complexities, and the need for technological upgradation. Efforts are ongoing to modernize industries, adopt automation, and enhance competitiveness.
• Exports and Global Presence: Indian industries are engaged in the production of goods for both domestic consumption and international markets. The country is a significant exporter of items like textiles, pharmaceuticals, and automotive components, contributing to foreign exchange earnings.

Tertiary Sector

• The tertiary sector, also known as the service sector, is a crucial and rapidly growing part of the economy. It encompasses a wide range of services provided to individuals and businesses. Unlike the primary and secondary sectors that deal with tangible goods, the tertiary sector primarily deals with intangible services. This sector includes services like education, healthcare, transportation, information technology, banking, retail, and entertainment.

Tertiary Sector:India

• Expanding Service Economy: India’s tertiary sector has seen remarkable growth over the years, and it now contributes significantly to the country’s GDP. This sector is becoming a major driver of economic development.
• Information Technology Hub: India has emerged as a global hub for information technology (IT) and software services. Cities like Bangalore and Hyderabad are known as IT hubs, hosting numerous IT companies and business process outsourcing (BPO) centers.
• Educational Services: India has a vast education sector, with a multitude of schools, colleges, and universities. It attracts students from all over the world. The country is also known for producing a large number of skilled professionals.
• Healthcare Services: India’s healthcare sector is experiencing growth, with modern hospitals, clinics, and medical tourism drawing patients from abroad. The country offers cost-effective healthcare solutions.
• Retail and E-commerce: The retail sector in India is evolving rapidly, with a blend of traditional markets and modern malls. E-commerce platforms have gained immense popularity, providing convenience and a wide range of products to consumers.
• Infrastructure Development: Infrastructure services like transportation, logistics, and telecommunications are witnessing expansion and modernization to support the growing service sector. Initiatives like “Digital India” aim to enhance connectivity and digital services.

Comparing the Sectors of Economy

• Measuring Production and GDP:
  • In an economy, various goods and services are produced across primary, secondary, and tertiary sectors.
  • To assess total production and employment, it’s essential to measure the value of these goods and services rather than their sheer quantity.
• Using Values of Goods and Services:
  • Economists recommend using the values of goods and services to calculate total production.
  • For example, if 10,000 kgs of wheat are sold at Rs 20 per kg, the value of wheat is Rs 2,00,000.
• Counting Final Goods and Services:
  • Not all goods and services are counted; only the final ones are considered.
  • Final goods are those that reach consumers directly, like biscuits sold in the market.
  • Intermediate goods, like wheat and wheat flour, are used in producing final goods and are not counted separately.
• Calculation of GDP:
  • The total value of final goods and services produced in each sector during a specific year provides the total production of that sector for that year.
  • Summing up the production in the three sectors gives the Gross Domestic Product (GDP) of a country.
  • GDP represents the total value of all final goods and services produced within a country during a particular year.
  • It serves as a measure of the country’s economic size.
• GDP Measurement in India:
  • In India, the central government ministry, with the assistance of various state and union territory departments, collects data related to the volume and prices of goods and services.
  • This data is then used to estimate the country’s GDP, showcasing the economic scale of India.

Historical Changes in Different Sectors

• Initial Agricultural Emphasis: In many developed countries, during the initial stages of development, the primary sector (agriculture) played a significant role in economic activities.
• Agricultural Advancements: As farming methods improved, the agriculture sector produced more food, allowing people to explore other occupations.
• Rise of Craftspersons and Traders: With the surplus food production, there was a growth in craftspersons, traders, and buying and selling activities.
• Emergence of Supporting Professions: The diversification of economic activities led to the emergence of transporters, administrators, and even military roles.
• Primary Sector Dominance: Despite these changes, the primary sector remained the primary source of goods and employment for a long time.
• Shift to Secondary Sector: With the introduction of new manufacturing methods, factories expanded, and a significant portion of the population shifted from farming to factory work.
• Growth of Factory-Produced Goods: As factories produced a wide range of goods at affordable prices, there was an increased demand for these products.
• Tertiary Sector Dominance: In the last century, a transition occurred in developed countries where the tertiary sector, primarily services, became the most important in terms of both total production and employment.

Rise in the Importance of the Tertiary Sector in India

• Tertiary Sector Growth: Over four decades, from 1973-74 to 2013-14, the tertiary sector in India witnessed the most significant increase in production, making it the largest producing sector in the country.
• Basic Service Needs: Basic services such as healthcare, education, transportation, and administration are essential in any country. In a developing nation like India, the government is responsible for providing these services.
• Secondary Sector Impact: The growth of agriculture and industry contributes to the development of services like transport, trade, and storage, increasing the demand for such services.
• Rising Income Levels: As income levels rise, people demand more services like dining out, tourism, shopping, private healthcare, private education, and professional training, particularly noticeable in urban areas.
• Information Technology: New services, especially those based on information and communication technology, have become crucial and are rapidly expanding.
• Diversity in Service Sector: The service sector in India encompasses a wide range of jobs, from highly skilled professionals to those engaged in small-scale services. Not all segments of the sector are growing at the same pace, and some workers face challenges in making a living. This diversity is a notable aspect of the service sector in India.

Where are People Working?

• Share of Sectors in GDP: The share of sectors in GDP has shifted over the years, reflecting changes in the economic landscape.
• Employment Distribution: In contrast to the shift in GDP, the distribution of employment has not seen a similar change. The primary sector remains the largest employer.
• Limited Job Creation: The primary reason for the continued dominance of the primary sector in employment is the limited creation of jobs in the secondary and tertiary sectors.
• Productivity vs. Employment: Despite significant growth in industrial and service output, job creation in these sectors has not matched the pace of production.
• Imbalance: More than half of India’s workforce is in the primary sector, primarily in agriculture, producing only a fraction of the GDP. This reflects an imbalance in the labor force.
• Underemployment in Agriculture: Many agricultural workers are underemployed, as illustrated by the example of a small farmer like Laxmi’s family, where all members are engaged in the plot due to a lack of alternative opportunities.
• Disguised Unemployment: Underemployment is often hidden and referred to as disguised unemployment, where individuals appear to work but are not fully utilized.
• Increase in Family Income: When individuals transition to other forms of employment, such as working in factories, the family’s income can increase without negatively impacting agricultural production.
• Underemployment Across Sectors: Underemployment is not exclusive to agriculture; it can also occur in other sectors, as seen in casual workers in the service sector who search for daily employment.
• Limited Opportunities: Many individuals take up low-paying and sporadic work due to a lack of better opportunities, highlighting the need for more job creation and improved employment options.

Creating More Employment Chances

• Irrigation for Agriculture: Providing irrigation facilities to small farmers can enable them to cultivate more and employ additional family members.
• Infrastructure Development: Investment in transportation, storage, and rural roads can facilitate the growth of agriculture and create jobs in related services.
• Access to Agricultural Credit: Access to affordable agricultural credit is crucial to help farmers purchase seeds, fertilizers, and equipment, improving productivity.
• Promotion of Semi-Rural Industries: Establishing industries and services in semi-rural areas can create employment opportunities, such as dal mills, cold storage, honey collection centers, and food processing units.
• Education Sector Employment: There is a significant need for teachers and staff in the education sector, and creating more schools can generate employment, especially in rural areas.
• Healthcare Sector Employment: Expanding healthcare facilities in rural areas can lead to the employment of doctors, nurses, and health workers.
• Regional Development: Every region has potential for income and employment generation, whether through tourism, regional craft industries, or IT services. Government support and planning are essential.
• Quick Measures: While some strategies take time to implement, short-term solutions are needed. The Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA) guarantees 100 days of employment for rural workers and aims to provide productive land-based work.
• Tourism Potential: Improving the tourism sector can offer employment to a substantial number of people, as per the Planning Commission’s study.
• Right to Work Legislation: The central government has implemented the Mahatma Gandhi National Rural Employment Guarantee Act 2005 to provide employment and unemployment allowances in designated districts, emphasizing land-based work for increased production. 

Organised Sector

• Definition: The organized sector in India refers to those industries and businesses that operate under established rules and regulations. These entities adhere to labor laws, taxation, and safety standards.
• Formal Employment: It is characterized by formal employment contracts, regular salaries, and social security benefits. Employees in the organized sector often enjoy more job security and better working conditions.
• Key Industries: The organized sector includes industries such as information technology, manufacturing, finance, healthcare, education, and other services. It is a vital part of the Indian economy.
• Labor Protection: Workers in the organized sector are entitled to various labor protections and benefits, such as provident funds, gratuity, and health insurance, provided by their employers.
• Economic Contribution: The organized sector contributes significantly to India’s GDP and plays a crucial role in the country’s economic development by providing stable employment opportunities and contributing to overall productivity.

Unorganised Sector

• Definition: The unorganized sector in India comprises a wide range of economic activities and jobs that operate outside the formal regulatory framework. It includes various informal jobs and businesses that lack the legal protections and structure found in the organized sector.
• Informal Nature: The unorganized sector is characterized by informality. Workers in this sector often have irregular employment, lack formal contracts, and do not receive the same level of job security and benefits as those in the organized sector.
• Diverse Occupations: This sector includes a vast array of occupations, from street vendors, small-scale agricultural workers, construction laborers, domestic helpers, and self-employed individuals to various small and medium enterprises (SMEs) that operate informally.
• Economic Significance: Despite its informality, the unorganized sector plays a crucial role in the Indian economy. It provides employment to a substantial portion of the workforce and contributes significantly to economic activities, particularly in rural areas.
• Challenges: Workers in the unorganized sector often face challenges related to low wages, lack of social security, and inadequate working conditions. The government has introduced various social welfare schemes and initiatives to address these issues and provide better livelihoods for those employed in the unorganized sector.

Protecting the Workers of Unorganised Sector

• Slow Expansion of Organized Sector: The organized sector, which provides desirable jobs, has been growing slowly. Many organized sector enterprises operate informally in the unorganized sector to evade taxes and labor laws.
• Forced Entry into Unorganized Sector: Due to limited opportunities in the organized sector, many workers are compelled to enter the unorganized sector, where they often receive low wages, face exploitation, and lack job security and benefits.
• Job Loss in Organized Sector: Since the 1990s, there has been a notable trend of workers losing jobs in the organized sector and transitioning to the unorganized sector, where incomes are lower.
• Vulnerable Groups: Vulnerable workers in the unorganized sector include landless agricultural laborers, small and marginal farmers, sharecroppers, artisans, small-scale industry workers, casual laborers, street vendors, and more.
• Support for Farmers: In rural areas, small and marginal farmers need support through timely access to seeds, agricultural inputs, credit, storage facilities, and marketing channels.
• Protection for Vulnerable Communities: Many workers from scheduled castes, tribes, and backward communities are found in the unorganized sector, facing irregular and low-paid work, along with social discrimination. Protecting and supporting these workers is vital for both economic and social development.

Public and Private Sectors

• Ownership and Service Delivery: Economic activities can be categorized into the public and private sectors based on who owns assets and is responsible for service delivery. In the public sector, the government owns assets and provides services, while in the private sector, private individuals or companies own assets and deliver services.
• Examples: Public sector entities include government-run services like railways and the post office, while private sector examples are companies such as Tata Iron and Steel Company Limited (TISCO) and Reliance Industries Limited (RIL).
• Profit Motive: Activities in the private sector are primarily driven by the motive to earn profits. To access these services, individuals and companies typically need to pay for them.

Role of Government Spending

• Societal Needs: Governments spend on a wide range of activities because some needs of society as a whole are not efficiently provided by the private sector. This is often due to the high cost and difficulty of collecting fees from individuals for these services.
• Examples of Government Spending: Government spending encompasses infrastructure projects such as roads, bridges, railways, harbors, and electricity generation. These are essential for the public but may be economically unviable for private entities.
• Support for Industries: Governments may support industries, especially small-scale units, by providing essential services at affordable rates. For example, producing and supplying electricity at reasonable rates to keep production costs low.
• Fair Price Support: Governments intervene to support both producers and consumers. An example is when the government buys agricultural produce like wheat and rice at fair prices from farmers and provides them to consumers at lower rates through ration shops.
• Primary Responsibilities of Government: The government has primary responsibilities in areas such as healthcare, education, clean drinking water, housing for the poor, and food and nutrition. Ensuring access to quality education, healthcare, and essential services for all citizens is a key government duty. Additionally, it is vital for the government to focus on the welfare of the poorest and most marginalized regions through increased spending on these areas.