Sectors of Indian Economy

Last Updated on August 28, 2017 by Bharat Saini

Economic activities are activities that result in the production of Goods and Services. Indian Economy can be classified into various sectors on the basis of ownership, working conditions of the workers and the nature of the activity being performed. Sectors are the group of economic activities classified using some important criterion. 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.

Classifications of economic activities on the basis of nature of activity are as under:

• Primary Sector or Agriculture Sector in which activities are undertaken by directly using natural resources because it forms the base for all other products that we subsequently make, such as Agriculture, Mining, Fishing, Forestry, and Animal husbandry or Dairy:
  • Primary Sector is directly dependent on the environment for manufacture and production
  • Primary sector is a sector whereby the raw materials are extracted from the earth
  • Primary Sector includes those activities which lead to the production of goods by exploitation of natural resources
  • Primary Sector produces natural products like cotton, milk, fruits, wheat, fish, rubber etc

 

• Secondary Sector or Industrial Sector covers activities in which natural products are changed into other forms through ways of manufacturing or processing that we associate with industrial activity. It is a next step after the primary, where the product is not produced by nature but has to be made and therefore some process of manufacturing is essential; it could be in a factory, a workshop or at home. Since this sector is associated with different kinds of industries where physical goods are produced, or where natural products are changed into other forms through ways of manufacturing that we associate with industrial activity it is also called industrial sector:
  • Secondary sector is a sector whereby the raw material that is extracted from earth is converted to semi- finished goods or finished goods.
  • Secondary sector activities follow the primary activities, in which the natural products are changed to manufacture different commodities.
  • Secondary sector is where an agricultural product like cotton or cotton fibre from a plant is used to spin yarn and weave cloth into cotton fabric or sugar cane is processed to produce sugar.
  • Secondary sector includes those activities which result in the transformation of natural products into other forms by manufacturing; and includes construction.
  • Secondary sector of the national economy is where the natural ingredients are used to create products and services that are consequently used for consumption.

 

• Tertiary Sector or Service Sector is when the activity involves providing intangible goods like services then this is part of the tertiary sector. India’s services sector covers a wide variety of activities such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, management consultancy, telecommunication, and information technology including  cyber cafes, ATM booths, call centres, software companies, community, social and personal services, and services associated with construction. Like the secondary sector, it also provides value addition to a product. This sector is also known as the service sector.
  • Tertiary Sector activities help in the development of the primary and secondary sectors.
  • Tertiary Sector activities, by themselves, do not produce a good but they are an aid or a support for the production process.
  • Tertiary Sector is there where goods that are produced in the primary or secondary sector need to be transported by trucks or trains and then sold in wholesale and retail shops.

Classification of economic activities on the basis of conditions of work is as under:

• Organised Sector is registered with the government. In this sector, people get assured work, and the employment terms are fixed and regular. A number of acts apply to the enterprises, schools and hospitals covered under the organised sector. Protection and support for the unorganised sector workers is very necessary for both economic and social development.

Unorganised Sector enterprises are not registered with the government and include a worker in the organized sector who is not covered by any of the Acts pertaining to welfare Schemes as mentioned in Schedule-II of Unorganized Workers Social Security Act, 2008. In this sector employment terms are neither fixed nor regular. The unorganised sector covers most of the rural labour and a substantial part of urban labour, it includes activities carried out by small and family enterprises, partly or wholly with family labour. An unorganised worker is a home-based worker or a self-employed worker or a wage worker in the unorganized sector.

 

Classification of economic activities on the basis of ownership of assets is as under:

 

• Public Sectoris the part of the economy concerned with providing various governmental services. The composition of the public sector varies by country, but in most countries the public sector includes such services as the military, police, infrastructure (public roads, bridges, tunnels, water supply, sewers, electrical grids, telecommunications, etc.), public transit, public education, along with health care and those working for the government itself, such as elected officials. The public sector might provide services that a non-payer cannot be excluded from (such as street lighting), services which benefit all of society rather than just the individual who uses the service. 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 Sectoris the part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the State. Activities in the private sector are guided by the motive to earn profits. To get such services we have to pay money to these individuals and companies.