Chapter 1: Sectors of the Indian Economy

What is an economy?
Ans: A framework within which all the economic activities of a country can be largely described is called the
economy.

Which are the three broad sectors of an economy?

Ans: The three broad sectors of an economy are: (1) Primary Sector, (2) Secondary Sector, and (3) Tertiary Sector.

Give one reason for the rapid growth of service sector in India.
Ans: One reason for the rapid growth of service sector in India is:-
(1) The service sector employs many different kinds of people like small shopkeepers, repair persons,
transport persons, etc. it also employs highly skilled and educated workers.

Name the sector which forms the base for all other products.
Ans: Primary sector is the sector which forms the base for all other products.

Name the sector which helps in the development of the primary and secondary sectors.
Ans: Tertiary or service sector is the sector which helps in the development of the primary and secondary sectors.

Name the sector in which natural products are changed into other forms.
Ans: Secondary sector is the sector in which natural products are changed into other forms.

Write two measures adopted to create more employment.

Ans: Two measures which can be adopted to create more employment are:-
(1) In semi-rural areas, more industries and services can be promoted where a large number of people may be
employed.
(2) In villages near forest areas, people can start honey collection centres where farmers can come and sell wild
honey.

Why do you think MGNREGA 2005 is referred to as ‘Right to work’?

Ans: MGNREGA 2005 is referred to as ‘Right to work’ because under this Act, those who are able to work, and
are in need of work, can apply for work. One person has been guaranteed 100 days of employment in every rural
household in a year by the government. If the government fails in its duty to provide employment within 15 days, it
will give unemployment allowance to the unemployed people.

How would you distinguish between organised and unorganised sector?

Ans: Organised sector includes enterprises or places of work where the terms of employment are regular and
people have assured work. In this sector, workers are governed by certain rules and regulations. Self-employed people
too have to register themselves with the government, in this sector.
On the other hand, unorganised sector includes activities of people where no rules and regulations are
followed. Landless agricultural labourers, small and marginal farmers, workers in small industries, street vendors, rag
pickers etc. fall under the category of unorganised sector.

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What do you mean by disguised unemployment?
Ans: When people are apparently working but they are made to work less than their potential, it is called disguised
unemployment.

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What is the condition of workers employed in the organised sector?
Ans: The condition of workers employed in the organised sector are:-
(1) They enjoy security of employment.
(2) They are expected to work only for a fixed number of hours. If they are asked to work more, they will be paid
overtime by the employer.
(3) They also enjoy other benefits like provident fund, gratuity, paid leave, medical benefits and pension after
retirement.
(4) Various laws like Factories Act, Minimum Wage Act, Payments of Gratuity Act, Shops and Establishments
Act etc. are also followed.

How would you classify economic activities on the basis of ownership?

Ans: On the basis of ownership, economic activities are classified as:-
(1) Public sector: In this sector, the government owns most of the assets.
(2) Private sector: This sector includes all economic activities which are owned and controlled by individuals or
firms.

Workers in the unorganised sector need protection on the issues like wages, safety and health. Explain with
examples.
Ans: Workers in the unorganised sector indeed need protection on the issues like wages, safety and health. For
example, workers in this sector do not have any job security; they are not paid fair wages; they are often exploited by
their employers; their earnings are not regular and they have no other benefits. If they fail to go to work, no wage is
paid to them for that day. Moreover, they also face social discrimination. Workers belonging to the scheduled castes,
scheduled tribes and backward communities in the unorganised sector are excluded people and are not allowed to live
in better surroundings with better off people.

Why is the service sector an important sector in India?

Ans: There service sector is an important sector in India because of the following reasons:-
(1) This sector provides basic services like health, education, banking, insurance, etc. for the development and
provision of which the government takes the responsibility.
(2) Development of agriculture and industry requires the development of services like transport, storage, trade,
communication, etc.
(3) As income levels rise, certain sections of people start demanding more services like shopping, private schools,
private hospitals etc.
(4) Over the past decade, services based on information and technology are being increasingly demanded.
(5) Service sector employs different kinds of people like small shopkeepers, repair persons, transport persons, etc.
It also employs highly skilled and educated workers.
Workers are exploited in the unorganised sector. Give reasons.
Ans: Workers are exploited in the unorganised sector because initially the government had no control over this
sector. Workers do not have any job security; they are not paid fair wages; they are often exploited by their
employers; their earnings are not regular and they have no other benefits. If they fail to go to work, no wage is paid to
them for that day. Moreover, they also face social discrimination. Workers belonging to the scheduled castes,
scheduled tribes and backward communities in the unorganised sector are excluded people and are not allowed to live
in better surroundings with better off people. 39.14 crore workers, that is 82.7% of the total workers in India in 2011-
12 were working in the unorganised sector. Landless agricultural labourers, small and marginal
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farmers, workers in small industries, street vendors, rag pickers etc. fall under the category of unorganised sector.

How are the economic activities classified into primary, secondary and tertiary sectors?
Ans: On the basis of economic activities, the economy is classified into the following sectors:-
(1) Primary Sector: This sector includes activities relating to land like agriculture and allied activities such as
forestry, dairying, fishing, poultry farming, mining, stone quarrying etc. In this sector goods are produced by
exploiting natural recourses. For example, in the cultivation of wheat, we depend on natural factors like
rainfall, sunshine and climate. Similarly, in case of dairying we depend on the biological process of animals
and availability of fodder.
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 (2) Secondary Sector: This sector includes activities relating to manufacturing and construction. In this sector,
one type of product is converted into another. For example, manufacture of cotton yarn by using cotton fibre,
use of sugarcane for making sugar, and use of bricks to make houses and buildings, etc.
(3) Tertiary Sector: This sector provides services like transportation of goods, storage of goods, banking and
insurance, etc. These services are needed by households and primary and secondary sectors. This sector also
includes essential services provided by teachers, doctors, and personal services provided by washerman,
barbers, cobblers, lawyers, etc. In recent times, new services based on information technology such as cyber
cafe, ATM booths, call centres, software companies, etc. have become important.

Describe the significance of public sector.

Ans: The public sector is significance because of the following reasons:-
(1) The motivating force on the private sector is profit making instead of social welfare. So, in order to fulfil the
planned targets, the government can rely on the public sector.
(2) There are many activities which are the primary responsibilities of the government. The government must
spend on these. Providing education and health facilities to all at a nominal price is one such example.
Private sector cannot take a step regarding this because of low rate of profitability.
(3) Government also needs to pay attention to other aspects of human development such as availability of safe
drinking water supply, housing facilities for the poor, food and nutrition, etc.
(4) Large scale investment is needed in basic and key industries. Public sector can undertake this role as these
areas would be beyond the capacity of private sectors.
(5) Private sectors would not be interested in the development of industrially backward areas. The government
can publish enterprises in such areas.
(6) It is the government only which bears some of the cost and benefit for the public, especially for the poor. Poor
people are given essential goods like wheat, kerosene oil, etc. at lower prices than prices in the market.

Explain how public sector contributes to the economic development of a nation.

Ans: The purpose and the main motive of the public sector is to provide social welfare and not to earn profit. There
are a number of activities which are required by the society as a whole, but private sectors do not like to take
responsibility because of low rate of returns. Moreover, some of these activities need large sum of money which is
beyond the capacity of the private sector. Even if they provide these things they would charge a high price for their
use. Construction of roads, bridges, railways, generating electricity through dams, etc. are examples of such activities.
The government has to undertake such heavy spending and ensure that these things are available to everyone in the
society. Such were the contributions of the public sector to the economic development of a nation.

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Explain the relative importance of primary sector, secondary sector and tertiary sector in (a) GDP and (b)
employment.
Ans: (a) GDP: The relative importance of primary, secondary and tertiary sectors based on contribution to GDP is
explained under:-
As the economy develops the relative importance of the three sectors in the economy changes. In the initial
stages of development, primary activities remain most important activities of the economy. However, with the passage
of time and development, secondary sector becomes most important in terms of total production and employment.
But, in the final stage of development, the service sector becomes most important in terms of total production.
(b) Employment: The relative importance of primary, secondary and tertiary sectors based on employment is
explained under:-
Though there has been a change in the share of the three sector in GDP, yet a similar change has not taken
place in terms of employment. There is no shift out of primary sector in cause of employment. This is because enough
jobs were not created in the secondary and tertiary sectors. Even though industrial production went up by more than 9
times during the period 2011-12, employment in the industry went up by around three times. Similarly, though
production in the service sector rose by 14 times, employment rose around five times. This means that there are more
people employed in agriculture than actually needed.

Give examples of various activities which the government has to support.

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Ans: Some activities that the government has to support are as follows:-
(1) Agricultural activities: The government need to provide concessional loans to farmers to improve their
irrigation facilities. Farmers need to be given facilities like timely delivery of seeds, agricultural inputs, credit,
storage, etc.
(2) Workers’ activities in urban areas : Workers in urban areas should be provided government help for procuring
raw materials and for marketing their outputs.
(3) Construction activities: Construction of roads, bridges, railways etc. are examples of activities for which the
government has to take the responsibility to ensure their accessible to everyone.
(4) Providing health facilities and education: Providing health and education facilities to all at a nominal price is
the responsibility of the Government as the private sector cannot take a step regarding this because of low rate
of profitability.

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