Notes Class 10 Economics Chapter 2 Sectors of Indian Economy

Notes For All Chapters Economics Class 10 CBSE

1. Meaning of Economic Sectors

An economy consists of various economic activities such as producing goods, providing services, trading, etc.
To study them properly, we classify these activities into groups called sectors.

Economic activities are mainly divided into three sectors based on the nature of activity:

1. Primary Sector
2. Secondary Sector
3. Tertiary Sector

2. Primary Sector (Agriculture and Related Sector)

Meaning:

• Activities that involve direct use of natural resources.
• Depend largely on natural factors like rainfall, sunshine, and climate.
• The product is a natural product.

Examples:

• Cultivation of crops (agriculture)
• Dairy (milk production)
• Fishing
• Forestry
• Mining and extraction of minerals

Reason for the Name:

It is called “Primary” because it forms the base for all other products that are made later.

3. Secondary Sector (Industrial Sector)

Meaning:

• Activities that involve processing and manufacturing of goods using the natural products produced in the primary sector.
• The product is man-made through a manufacturing process.

Examples:

• Manufacturing cotton cloth from cotton fibre
• Making sugar from sugarcane
• Making bricks from clay
• Making steel from iron ore

Importance:

• This sector adds value to raw materials by transforming them into useful goods.
• It is also known as the Industrial Sector because industries are part of it.

4. Tertiary Sector (Service Sector)

Meaning:

• Activities that do not produce goods but provide services that help in the development of primary and secondary sectors.
• They support the process of production and distribution.

Examples:

• Transport, storage, banking, communication, trade
• Education, healthcare, administration, legal services
• Information technology, software, call centres, internet cafes

Importance:

• Provides services rather than goods.
• Helps connect producers and consumers.
• Also includes personal and community services such as teachers, doctors, barbers, and lawyers.

5. Interdependence of Sectors

Although the three sectors are different, they are interdependent:

• Farmers (primary) depend on industry (secondary) for fertilisers, tools, and machines.
• Industries depend on agriculture for raw materials.
• Both depend on the service sector for transport, banking, and trade.

6. Measuring the Contribution of Each Sector

How do we measure production?

• We measure the value of goods and services produced in each sector.

Why value and not quantity?

• Because goods are of different types (cars, wheat, mobiles) — they can’t be added directly.
  So, economists use the monetary value of production.

Counting Only “Final Goods”

• Final goods are ready for consumption.
• Intermediate goods are used in producing final goods.
• We count only final goods to avoid double counting.

Example:

Wheat → Flour → Biscuits
Only biscuits (final goods) are counted in GDP.

7. Gross Domestic Product (GDP)

Meaning:

• GDP is the total money value of all final goods and services produced within a country in one year.

Formula (Conceptually):

• GDP = Value of all Final Goods and Services produced in a year

Purpose:

• Shows how big and productive an economy is.
• Compares production across sectors and over years.

In India:

• GDP is measured by a Central Government Ministry, with help from all states and union territories.

8. Historical Changes in Sectors

In Developed Countries:

• Primary Sector dominated initially.
• With industrialisation, Secondary Sector became dominant.
• Later, Tertiary Sector became the largest in GDP and employment.

In India:

• 1970s: Primary sector was largest in production.
• 2013–14: Tertiary sector became the largest in production.
• But most employment is still in Primary Sector, not in Secondary or Tertiary.

9. Rising Importance of the Tertiary Sector in India

Reasons:

1. Basic Services by Government

• Education, health, defence, transport, banking, postal services, etc.

2. Development of Other Sectors

• Growth of agriculture and industries leads to higher demand for services like transport, trade, and storage.

3. Rising Income Levels

• People demand more services like tourism, restaurants, shopping, and private healthcare.

4. Growth of IT and Communication Services

• New services like software, online business, and call centres have rapidly expanded.

Unequal Growth:

• Highly skilled jobs (IT, finance) grow fast.
• Low-skilled services (vendors, repairers) grow slowly with low incomes.

10. Employment and the Problem of Underemployment

Employment Distribution:

• Primary Sector employs more than half of India’s workers but produces only about one-sixth of GDP.
• Secondary and Tertiary Sectors produce more but employ fewer people.

Meaning of Underemployment (Disguised Unemployment):

• More people are employed than required, so even if some stop working, output doesn’t fall.
• Seen mostly in agriculture and casual urban jobs.

Example:

A farmer’s family of 5 works on a small plot where only 2 are needed — others are underemployed.

11. How to Create More Employment

In Rural Areas:

• Improve Irrigation: Build wells, canals, dams to increase cropping and employment.
• Provide Cheap Credit: Banks should lend to farmers at low interest.
• Develop Rural Industries: Food processing, dal mills, cold storage, honey collection, etc.
• Build Roads and Storage: Better connectivity helps farmers sell produce.

In Urban Areas:

• Promote small-scale industries.
• Create more jobs in education, health, and services.
• Support tourism, crafts, and IT-based jobs.

12. Government Scheme – MGNREGA 2005

Full form:

• Mahatma Gandhi National Rural Employment Guarantee Act, 2005

Key Features:

• Provides 100 days of guaranteed employment in a year to every rural household.
• If work is not provided, people get unemployment allowance.
• Priority to projects that improve land and water resources.
• Known as the Right to Work.

Aim:

• To reduce poverty and underemployment in rural areas.

13. Division by Employment Conditions

(i) Organised Sector

• Registered with the government.
• Regular and fixed working hours.
• Fixed salary, paid leave, holidays.
• Job security and social benefits (PF, pension, medical).

Examples: Government offices, factories, banks, schools.

(ii) Unorganised Sector

• Small and scattered units.
• Not registered with the government.
• Irregular work, low wages, no job security.
• No benefits like PF, medical leave, or pension.

Examples: Agricultural labourers, street vendors, construction workers.

14. Protection of Workers in the Unorganised Sector

Problems:

• Low wages, irregular work, unsafe conditions, exploitation.

Who Needs Protection?

• Rural: Landless labourers, small and marginal farmers, artisans.
• Urban: Casual construction workers, vendors, small-scale workers.
• Socially backward groups: SCs, STs, OBCs face both economic and social problems.

Government’s Role:

• Provide credit, seeds, storage, and marketing support.
• Enforce labour laws, minimum wages, and safety measures.

15. Division by Ownership: Public and Private Sectors

(i) Public Sector

• Owned and operated by government.
• Aim: Public welfare, not profit.
• Funded by taxes.
• Examples: Railways, Post Office, BSNL, Government Schools.

Functions:

1. Build infrastructure — roads, bridges, electricity, irrigation.
2. Provide basic services — education, health, water, food, housing.
3. Support poor farmers and consumers through subsidies.
4. Ensure balanced development across all regions.

(ii) Private Sector

• Owned and run by individuals or companies.
• Aim: Profit-making.
• Examples: Tata, Reliance, Infosys, Jet Airways, Jio.

Role:

• Produce goods and services for profit.
• Invest capital but usually avoids loss-making or very costly projects.

16. Summary Table of Classifications