ECONOMICS

Le.2. SECTORS OF THE INDIAN ECONOMY

1.What are economic activities?

Ans: The activities which are undertaken by the people with the object of earning money are
called economic activities.
(or)
All those activities that gives income in return are called economic activities.
Ex: a worker working in a factory, a teacher teaching in a school etc.

We can understand these activities by classifying them or grouping them using some
criterion which can also be called sectors.

2. Classify economic activities on the basis of the nature of the activities.

Ans: On the basis of the nature of activities the economic activities are classified as
1. Primary Sector (Agriculture and related sector)
2. Secondary Sector (Industrial sector)
3. Tertiary Sector (Service sector)

3. What are Primary activities? Give examples.

(or)
What are the various activities undertaken in the primary sector?
Ans: Primary activities are those activities which are undertaken directly using natural
resources.
2. It depends on natural and biological processes.
Ex:1. For the growth of cotton plant we depend on natural factors like rainfall, sunshine and
climate. The product cotton is a natural product.
2. Ex: In case of activity like dairy we depend on the biological process of the animals and
the availability of fodder etc. The product milk is also a natural product.
3. When we produce a good by exploiting natural resources it is an activity of primary sector
and it is primary because it forms the base for all products that we subsequently make.

4. Why is Primary sector also called agriculture and related sector?

Ans: In Primary sector the goods are produced by exploiting natural resources
(products).Since most of the natural products we get are from agriculture, dairy, fishing,
forestry etc, this sector is also called agriculture and related sector.

5. What are Secondary activities? Give examples.

(or)
What are the activities undertaken in the Secondary sector?
Ans: 1. The Secondary sector covers activities in which natural products are changed into
other forms through manufacturing processes associated with industrial activity.
2. This could be in a factory, a workshop or at home.
3. Ex 1. Using cotton fibre from a plant we can spin yarn and weave cloth.
Ex2. We can make sugar or gur by using sugarcane as a raw material.
6. Why is Secondary sector also called industrial sector?
(or)
Which sector is also called industrial sector. Why?
Ans: The Secondary sector covers activities in which natural products are changed into other
forms through the process of manufacturing associated with different kinds of industries that
come up. Hence it is also called industrial sector.

7. What are Tertiary activities? Give examples.

(or)
What are the activities under taken in the Tertiary sector?
Ans: 1. The Tertiary activities help in the development of the Primary and Secondary sectors.
2. These activities by themselves do not produce the good. They support the production
process. Ex: Goods that are produced in the primary and secondary sector would need to be
transported by trucks or trains or at times to be stored in godowns which is served by the
tertiary sector.

8. Why is the Tertiary sector called the service sector?

Ans: The activities in the tertiary sector help in the development of primary and secondary
sectors by providing services like transport, storage, communication, banking, trade etc,
rather than generating goods. So, the tertiary sector is also called the service sector.

9. Mention some services provided by the tertiary sector which may not directly help in
the production of goods.
Ans: Apart from generating services the tertiary sector also provides personal services and
administrative and accounting services. Ex: teachers, doctors, washermen, barbers, cobblers,
lawyers, internet café, ATM booths, call centres, software companies etc.

10. How can you say that the primary, secondary and tertiary sector are highly
interdependent?
Ans: The Secondary Sector is dependent on the Primary Sector for raw materials. The
Primary Sector in turn uses the products of the Secondary Sector such as machinery,
fertilizers, etc. Both the primary and secondary sector depend on tertiary sector for services
like trade, transport, banking, etc. Thus the Primary, Secondary and Tertiary sectors are
highly interdependent.
Ex: Cotton produced by farmers is transported by transporters to industries where the fibre is
spun and wove into cloth. If the transporters refuse to transport then the farmers would be in
loss and the industrialists would be in shortage of fibre.

11. Why is the classification of economic activities important? (or) Why is it necessary
to classify economic activities?
Ans: Classification of economic activities is important because it helps in estimating
1. the growth in GDP .
2. how much goods and services are produced
3. how many people are employed in each sector.
12. Distinguish between the Final goods and Intermediate goods.
Ans:
FINAL GOODS INTERMEDIATE GOODS

1. The goods which are used
either for final consumption
or capital formation are
called final goods.
2. The value of final goods is
included in the national
income.
3. Ex: Bread or bakery
products, cloth etc.
1. The goods which are used
up in producing the final
goods and services are called
intermediate goods.
2. The value of intermediate
goods is not included in the
national income.
3. Ex: Flour, cotton etc.

13. The value of intermediate goods is not included in the national income. Why?
(or)
While estimating the National income only the value of final goods and services is used.
Explain.
Ans: While estimating the performance of a sector only the value of final goods and services
is used because the value of final goods already includes the value of the intermediate goods
that are used in making the final good.
If we count the value of Intermediate goods we would be counting the value of same things a
number of times (double counting) which leads to over estimation of the value of goods and
services produced.
Ex: 1. A farmer sells the wheat to a flour mill at Rs.8per kg.
2. The mill grinds the wheat and sells the flour to a biscuit company at Rs.10 per kg.
3. The biscuit company uses the flour and things such a sugar and oil to make four packets of
biscuits which are sold to the consumer for Rs.60.
Here the value of output = Rs.8+Rs.10+Rs.60=78.
While calculating the national income only the value of the final output i.e Rs.60 should be
included and not Rs.78.
14. How is tertiary sector different from the other two sectors? Illustrate with
examples.
Ans: 1. The activities in the tertiary sector are concerned with generating services rather than
goods.
2. The activities in the tertiary sector do not produce a good but they help in the development
of the primary and secondary sector by providing services like transport, communication,
banking etc.
15. What is Gross Domestic Product (GDP)? Who is responsible for collecting the data
for the GDP in India?
Ans: Gross Domestic Product or GDP is the value of all final goods and services produced
within a country during a particular year. It is the money value of the gross output of the
nation.
In India, the mammoth task of measuring GDP is undertaken by the Central Government
Ministry with the help of various government departments of all the Indian states and Union
territories which collects information relating to total volume of goods and services and their
prices estimating the GDP.
16. What does the history of developed countries indicate about the shifts that have
taken place between sectors?
Ans: 1. At initial stages of development primary sector was the most important sector of
economic activity.
2. Due to the improved methods of farming the agriculture sector began to prosper.
Therefore many people could now take up other activities like trading, transport, army,
administration etc.
3. With the introduction of new methods of manufacturing, factories came up and started
expanding.
4. There was more employment opportunities in these factories. Hence there was a shift from
primary to secondary sector.
In the past 100 years there has been a further shift from secondary to tertiary sector in
developed countries as it has become the most important in terms of total production and
most of the working people are also employed in the service sector.

17. Refer the given Graph

18. Why is tertiary sector becoming so important in India?

Ans: 1. Basic Services: In a developing country the government has to take the
responsibility for the provision of basic services such as hospitals, educational institutions,
post and telegraph, banking etc. In India, as more and more people are employed to provide
the basic services, the share of the tertiary sector in GDP is increasing.

2. The development of agriculture and industry leads to the development of services such
as transport, trade, storage etc. Greater the development of the primary and secondary
sectors, more would be the demand for such services provided by the tertiary sector.

3.Rise in income levels: As income levels rises certain section of the people start demanding
many more services like eating out, tourism, shopping, private hospitals, private schools,
professional training etc.
4.New Services: With modernization and globalization, new services based on information
and communication technology have become important and essential.The production of
these services has been rising rapidly.

19. Only a part of the tertiary sector is growing in importance. Explain.

Ans: 1. Not all of the service sector is growing equally well.
2. Service sector in India employs many different kinds of people.
3. At one end there are a limited number of services that employ highly skilled workers.
4. At the other end, there are a very large number of workers engaged in services such as
small shopkeepers, repair persons, transport persons etc.
5. These people barely manage to earn a living and yet they perform these activities because
no alternative opportunities for work are available to them. Hence, only a part of the tertiary
sector is growing in importance.

20. In which sector most of the people are employed in India? Why?
Ans: Primary Sector.
The Primary sector continues to be the largest employer in India because
Not enough jobs were created in the secondary and tertiary sectors.
Although the industrial output or the production of goods went up more than 9 times,
employment in the industry went up by around three times.
The same applies to the tertiary sector. Though production in the service sector rose by 14
times, employment rose around five times.
As a result more than half of the workers in the country are working in the primary sector.

21. Although more than half of the workers in the country are working in primary
sector the contribution of primary sector is only a quarter of GDP. Give reasons.
Ans: The primary sector 1. Suffer from disguised unemployment.
2. lacks proper financial facilities
3. lacks training and skills.

22.What is underemployment? Why is it also called disguised unemployment?

Ans: Underemployment is a situation in which each one is doing some work but no one is
fully employed and they work less than their potential.
When underemployment is hidden in contrast to someone who does not have a job and is
clearly visible as unemployed is called disguised unemployment.

23.In what ways can the employment be increased in urban areas.

Ans: Urban unemployment is characterized by open unemployment and the educated
unemployment. Main causes of urban unemployment are insufficient economic
development, defective system of education and slow growth of industrialisation.
The employment in urban areas can be increased by
1. Reforming the educational system.
2. Promoting decentralization and dispersal of industrial activity.
3. Promoting small scale industries.
4. Encouraging self employment.
5. Developing techniques of production that can be taken up with low capital etc.
24. How would income and employment increase if farmers were provided with
irrigation and marketing facilities?
Ans: 1. Irrigation facilities can help a farmer to take a second crop (wheat) during rabi
season which will provide employment to more persons and lead to increase in income.
2. Marketing facilities will help the farmers to get good price for their produce and also
provide employment in related activities like transport, ware housing etc.

25. Why do you think MGNREGA 2005 is referred to as Right to Work?

Ans: MGNREGA 2005 is a law which is implemented by the government of India in 625
Indian districts. It is referred to as “right to work” because it guarantees 100 days of
employment in a year by the government to all those who are able to work. In case of failure,
unemployment allowances will be given to the people. The types of work that would in
future help to increase the production from land will be given preference under this Act.

26. Explain the objective of implementing MGNREGA 2005.

Ans: 1. This scheme targets the scheduled caste, the scheduled tribes, poor women who
suffer from poverty.
2. This scheme guarantees 100 days of employment in a year to every rural household in the
country.
3. Under this scheme the gram panchayat will register households and issue job cards.
4. The job cards enables a person to ask for work/employment and get it within fifteen days
of the demand for the work, failing which an unemployment allowance would be payable to
the person.

27. Explain disguised unemployment with an example each from the urban and rural
areas.
Ans: 1. Disguised unemployment in urban areas implies that more people are involved in
family business/ shops than required.
2. Disguised unemployment in rural areas means that more people are engaged in agriculture
than actually required as such their withdrawal from land will not lower production.
To remove this, lot of people from agricultural sector should be shifted to work elsewhere
which in turn would increase family income without reducing the agricultural production.
Example
For instance, take the case of a small farmer, Laxmi , owning about two hectares of
unirrigated land dependent only on rain and growing crops like jowar and arhar. All five
members of her family work in the plot throughout the year. They have nowhere else to go
for work. Everyone is working, none remains idle, but in actual fact their labour effort gets
divided. Each one is doing some work but no one is fully employed. This is the situation of
underemployment, where people are apparently working but all of them are made to work
less than their potential. It is also called disguised unemployment.
Now, supposing a landlord, Sukhram, comes and hires one or two members of the family to
work on his land. Laxmi’s family is now able to earn some extra income through wages.
Since you do not need five people to look after that small plot, two people moving out does
not affect production on their farm. In the above example, two people may move to work in a
factory. Once again the earnings of the family would increase and they would also continue
to produce as much from their land.
 This means that even if we remove a lot of people from agricultural sector and provide them
with proper work elsewhere, agricultural production will not suffer. The incomes of the
people who take up other work would increase the total family income.
This underemployment can also happen in other sectors. For example there are thousands of
casual workers in the service sector in urban areas who search for daily employment. They
are employed as painters, plumbers, repair persons and others doing odd jobs. Many of them
don’t find work everyday. Similarly, we see other people of the service sector on the street
pushing a cart or selling something where they may spend the whole day but earn very little.
They are doing this work because they do not have better opportunities.

28. Distinguish between open unemployment and disguised unemployment.

Ans: DISGUISED UNEMPLOYMENT: It is a situation in which more persons are
employed than required. If a part of the labor force is withdrawn it does not affect the
production.
OPEN UNEMPLOYMENT: It is a situation in which a person is ready to work but he is
unable to find a work and openly search for employment.

29. In India the development process has led to an increase in the share of tertiary
sector in GDP. Do you agree with this statement? Explain.
Ans:

Yes. I agree with this statement. The main driving force behind high growth rate in GDP is
the extremely good performance of the tertiary sector in general and the organized service
sectors (transport, communication, banking, finance etc) in particular.

30. “Tertiary sector is not playing any significant role in the development of Indian
economy”. Do you agree? Give reasons in support of your answer.
Ans: 1. The tertiary sector in India employs many different kinds of people but there are a
limited number of services that employ highly skilled and educated workers.
2. Production in the service sector rose by more than 14 times and employment rose around
five times.
3.The secondary and the tertiary sector produces three fourth of the produce whereas they
employ less than half of the people.

31. Service sector in India employs two different kinds of people. Who are those?
Ans: 1. Skilled and educated people: It includes doctors, engineers, teachers, defence
persons, police etc.
2. Unskilled and uneducated people: It includes shopkeepers, traders, farm labourers etc.

32. How are the activities in the economy classified on the basis of employment
conditions?
Ans: On the basis of the employment conditions the activities in the economy are classified
as
1.Organised Sector
2. Unorganised Sector

1.ORGANISED SECTOR: An organized sector covers those enterprises or places of work

where
1. The terms of employment are regular.
2. People have assured work
3. They are registered by the government
4. They have to follow rules and regulations which are given in various laws like the
Factories Act, Minimum Wages Act, Payment of Gratuity Act etc.
It is called organized because it has some formal processes and procedures.
2.UNORGANISED SECTOR: 1. An unorganized sector is a sector which is not registered
by the government.
2.The terms of employment are not regular.
3.There are rules and regulations but these are not followed.
4. Employment is not secure.
This sector includes a large number of people who are employed on their own doing small
jobs.
33. Workers are exploited in the unorganized sector. Do you agree with this view? Give
reasons in support of your answer.
Ans: The workers in the unorganized sector include agricultural labourers, small and
marginal farmers, artisans, casual workers, street vendors, head load workers etc. They suffer
from problems like low wages, low social status weak bargaining power and low duration of
employment. There is no provision for overtime, paid leave, medical leave etc.
34. The workers in the unorganized sector need protection on the following issues:
wages, safety and health. Explain with examples.
Ans: Wages: The wages in unorganized sector are low and not regular. There is no provision
for overtime, paid leave etc.
Safety: Workers always face the element of risk as there are no rules and regulations
followed with regard to safety.
Health: Long working hours and unhygienic working environment affect the health of the
workers adversely.
35. Compare the employment conditions prevailing in the organized and unorganized
sectors.
Ans: Organised Sector:
1.Registered by the government.
2.Follows rules and regulations given in various laws.
3.Formal processes and procedures.
4.Security of employment to the workers.
5.Fixed working hours.
6.Overtime for extra hours of work.
7.Benefits like Provident Fund, Gratuity, Paid leave etc.
Unorganised Sector:
1.Outside the control of the government.
2.Small and scattered units.
3.No proper rules and regulations.
4.Low paid and irregular jobs.
5.High insecurity
6.No provision for overtime, paid leave etc.
36. There are no regulations on the employers in the unorganized sector. How does this
effect the farmers? Why are they still compelled to depend on them (employers)?
Ans: Adverse employment conditions prevail as the employers in unorganized sector do not
follow any rules and regulations. Farmers are still compelled to depend on them as they do
not have better opportunities or alternatives. Nearly 80% of rural household in India are in
small and marginal farm category.
37. Workers in unorganized sector face social discrimination. Explain.
Ans: 1. The majority of workers in unorganized sector are from scheduled caste tribes and
backward communities.
2. Besides getting the irregular and low paid work, these workers face social discrimination.
3. Protection and support to the unorganized sector workers is necessary for both economic
and social development.
38. Give a few examples of public sector activities and explain why the government has
taken them up.
Ans: Examples of public sector activities:-
1.Construction of roads.
2.Construction of railways, bridges.
3.Providing irrigation through dams.
Reasons why government takes up these activities.
1.These activities need spending large sum of money which is beyond the capacity of the
private sector.
2.Private sector may charge high rate for their use.
3.It is difficult to collect money from thousands of people who use these facilities.
4.Sometimes the government has to support the private sector by taking up activities like
selling electricity at the cost of generation.
5.It is the primary responsibility of the government to spend on health and education
facilities.

39. How are the activities in the economy classified on the basis of the ownership of the
enterprise?
Ans: On the basis of the ownership of the enterprise the (economic) activities in the economy
are classified as Public sector and Private sector.
 PUBLIC SECTOR
1.It is controlled and managed by the
government.
2.The main aim of the sector is
public welfare.
3.It provides basic facilities like
health, education, food and security
to the people.
Ex: Railways, Post office, BSNL etc.
PRIVATE SECTOR
1. It is controlled and managed
by an individuals or group of
individuals.
2. The main aim of this sector is
to earn maximum profits.
3. It provides consumer goods to
the people.
Ex: TISCO, Reliance etc.

40. Explain how public sector contributes to the economic development of a nation?
Ans: 1. Public sector undertakes the activities which are important for the development of
the public in general.
2. It spends huge amount of money in the interest of the public.
3. It provides services at a low rate.
4. The government invests in construction of roads, bridges, railways, dams, generating
electricity etc and thus ensure that these facilities are available for everyone which in turn
accelerates the economic development of our nation.

41.For each of the sectors that we came across in this chapter why should one focus on
employment and GDP? Would there be other issues which should be examined?
Discuss.
Ans: Refer Ans 18.
Ans: 1. Basic Services: In a developing country the government has to take the
responsibility for the provision of basic services such as hospitals, educational institutions,
post and telegraph, banking etc. In India, as more and more people are employed to provide
the basic services, the share of the tertiary sector in GDP is increasing.

2. The development of agriculture and industry leads to the development of services such
as transport, trade, storage etc. Greater the development of the primary and secondary
sectors, more would be the demand for such services provided by the tertiary sector.

3.Rise in income levels: As income levels rises certain section of the people start demanding
many more services like eating out, tourism, shopping, private hospitals, private schools,
professional training etc.

4.New Services: With modernization and globalization, new services based on information
and communication technology have become important and essential.The production of
these services has been rising rapidly.

42. The following table gives the GDP in Rupees (crores) by three sectors.
 YEAR PRIMARY SECONDARY TERTIARY
1950 80,000 19,000 39,000
2011 8,18,000 12,49,000 28,18,000

i) Calculate the share of the three sectors in GDP for 1950 and 2011.

Ans: In 1950, Total GDP of the three sectors: Rs.80,000+ RS.19,000+ Rs.39,000=
Rs.1,38,000 crores.

Primary sector:- 80,000÷1,38,000 x 100 = 57.96%

Secondary sector: 19,000 ÷ 1,38,000 x 100 = 13.76%

Tertiary sector: 39,000÷ 1,38,000 x 100 = 28.26%

In 2011, Total GDP of the three sectors: Rs.8,18,000+Rs.12,49,000+Rs.28,18,000=

Rs.48,85,000.

Primary sector: 8,18,000÷ 48,85,000 x 100 = 16.74%

Secondary sector: 12,49,000 ÷ 48,85,000 x 100 =25.56 %

Tertiary sector: 28,18,000 ÷ 48,85,000 x 100 =57.68 %

iii) What conclusion can we draw from the bar graph?

Ans: Comparing the GDP of the three sectors of 1950 and 2011, we can conclude that the
share of the primary sector in GDP has decreased.
The share of the secondary sector in GDP has increased.
The share of the tertiary sector in GDP has also increased.
This shows that the economy is moving on the path of development as the share of the
secondary and tertiary sector in GDP has increased in 2011 as compared to 1950.