SECTORS OF INDIAN ECONOMY CLASS 10 (NCERT) NOTES

 SECTORS OF INDIAN ECONOMY CLASS 10 (NCERT) NOTES

There are many activities that are undertaken by directly using natural resources. 

For example, 

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. 

Product: cotton, is a natural product. 

Similarly, 

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. 

Definition:

When we produce a good by exploiting natural resources, it is an activity of the primary sector. 

Why primary? 

This is because it forms the base for all other products that we subsequently make. 

Since most of the natural products we get are from agriculture, dairy, fishing, forestry, this sector is also called agriculture and related sector.

Secondary Sector:

In which natural products are changed into other forms through ways of manufacturing (industrial activity). 

It is the next step after primary. 

The product is not produced by nature 

• But has to be made and therefore some process of manufacturing is essential.
• in a factory, 
• a workshop or 
• at home. 

For example, 

using cotton fibre from the plant, 

• we spin yarn and weave cloth. 

Using sugarcane as a raw material, we make sugar or qur. 

We convert earth into bricks and use bricks to make houses and buildings. 

Since this sector gradually became associated with the different kinds of industries that came up, it is also called as industrial sector.

Tertiary sector 

It 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. 

At times, it may be necessary to store these in godowns. 

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 personal services such as washermen, barbers, cobblers, lawyers, and people to do administrative and accounting works.

In recent times, 

new services based on information technology such as internet cafe, ATM booths, call centres, software companies etc have become important.

Comparing of the three sectors:

The various production activities in the 

• primary, 
• secondary and 
• tertiary sectors 

produce a very large number of goods and services. 

Also, the three sectors have 

• a large number of people working in them to produce these goods and services. 

The next step, therefore, 

• Is to see how much goods and services are produced and how many people work in each sector. 

In an economy there could be one or more sectors which are dominant in terms of 

• Total production and 
• Employment, 

while other sectors are relatively small in size.

How do we count the various goods and services and know the total production in each sector?

With so many thousands of goods and services produced, you might think this is an impossible task! 

To add all It won’t make sense!!!

To get around this problem, 

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 20 per kg, the value of wheat will be Rs 2,00,000. 

The value of 5000 coconuts at Rs 15 per coconut will be Rs 75,000. 

Similarly, the value of goods and services in the three sectors are calculated, and then added up.

Remember, there is one precaution one has to take. 

• 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 20 per kg. 

The mill grinds the wheat and sells the flour to a biscuit company for Rs 25 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 80 (Rs 20 per packet). 

Biscuits are the final goods, i.e., goods that reach the consumers.

Why are only ‘final goods and services’ counted? 

• 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 80 for the biscuits (final good) already includes the value of flour (Rs 25). 

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.

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. 

• And the sum of production in the three sectors gives what is called the Gross Domestic  (GDP) of a country. 

GDP shows how big the economy is.

In India, the mammoth 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.

Historical Change in Sectors

Generally, 

now developed countries that at initial stages of development, 

• Primary sector was the most important sector of economic activity.

As the methods of farming changed and agriculture sector began to prosper, 

• It produced much more food than before. 
• Many people could now take up other activities. 

There were increasing number of craft- persons and traders. 

Buying and selling activities increased many times. 

Besides, there were also transporters, administrators, army etc. 

However, at this stage, 

• most of the goods produced were natural products from the primary sector and 
• most people were also employed in this sector.

Over a long time (more than hundred years), and 

• especially because new methods of manufacturing were introduced, 
• factories came up and started expanding. 

Those people who had earlier worked on farms now began to work in factories in large numbers. 

**They were forced to do so as you read in history chapters. 

People began to use many more goods that were produced in factories at cheap rates. 

Secondary sector gradually became the most important in total production and employment. 

Hence, over time, a shift had taken place. 

• This means that the importance of the sectors had changed.

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.

Rising Importance of the Tertiary Sector in Production

Over the forty years between 1973-74 and 2013-14, 

• while production in all the three sectors has increased, 
• it has increased the most in the tertiary sector. 

As a result, in the year 2013-14, 

• 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, 

Basic Services:

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. 

Developing country:

In a developing country the government has to take responsibility for the provision of these services.

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.

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.

Fourth,

over the past decade or so, 

• Certain new services such as those based on information and communication technology have become important and essential. 

Only a part of this sector is growing in importance.

Not all of the service sector is growing equally well. 

Service sector in India employs: 

• Many different kinds of people. 

• Employ highly skilled and educated workers (Less in number)

At the other end, there are a very large number of workers engaged in services such as small shopkeepers, repair persons, transport persons, etc. 

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. 

You shall read more about this in the next section.

Where are most of the people employed?

Graph 2 presents percentage share of the three sectors in GDP. Now you can directly see the changing importance of the sectors over the forty years.