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On the basis of economic activities


The Indian economy can be divided into various sectors as per different criteria.

On the basis of economic activities in which the workers are engaged in, the economy is divided into the following:

  1. Primary sector
  2. Secondary sector
  3. Tertiary sector
Primary sector Primary activities are those which are based on natural resources. Cultivation of land to produce different types of crops, livestock rearing and dairy farming, fishing, mining and quarrying, forestry, etc. are primary activities.

Secondary sector Activities of the secondary sector follow the primary activities, in which the natural products are changed to manufacture different commodities. An agricultural product like cotton is woven into cotton fabric or sugarcane is processed to produce sugar. In this sector, the activities are associated with processing in industries. Thus, the secondary sector is also called the industrial sector.

Tertiary sector In the tertiary sector, activities that assist the development of the primary and secondary sectors are carried out. Transportation of finished products from the factories, raw materials transported from agricultural fields, banking facilities, telecommunication, etc. are activities that support the primary and secondary sector activities. Generally, services are involved rather than production of any goods. This is also called the service sector. The service sector also includes essential services like doctors, teachers, lawyers, administrators, etc. New services like information technology, software companies, etc. have become important tertiary activities.

All the activities are, however, highly interdependent. The manufacturing activities in the secondary sector are dependent on the raw materials produced from the primary activities. The tertiary activities in turn, support both the primary and secondary sectors.


The activities in these three sectors contribute to the employment of the people, total production in the country, as well as the economic development. The final cost of production of each of the commodities and services produced in the economy include the value of goods and services involved at all the stages of production. The value of final goods and services in each of the sectors during a particular year indicates the annual total production of the sector. The sum of production in all the sectors is called ‘gross domestic product’ (GDP) of a country. Thus, GDP indicates the total production in the economy. In India, the Central Government calculates the GDP by collecting information about the total volume of goods and services produced in all the states and union territories.

For a long period of time, of the three sectors, the primary sector dominated. With the improvement in technology, new methods of manufacturing were introduced, and more and more people found opportunities to work in factories. Thus, the activities in the secondary sector improved and a gradual shift was noticed in the predominance of the primary sector. Subsequently, the service sector developed and provided huge employment options. In India, since 2003, the tertiary sector has stood out as the largest sector in terms of production, replacing the primary sector. The probable reasons for the shift towards the tertiary sector are the following:

  1. Basic services such as medical facilities, educational services, postal services, administrative services, transport services, defence, banking and insurance, etc. are provided by the government.
  2. Developments in the primary and secondary sectors have led to higher demands for services such as transport, storage, trade, etc.
  3. With the rise in the standard of living of people and higher incomes, especially in urban areas, there is an increase in the demand for services such as tourism, shopping, professional and skill-based education, etc.
  4. There has been a rapid rise in new services such as information and communication technology.

The educated youth with technical skills have found better opportunities of employment in the service sector. Services offered by traders and service personnel who work in a smaller scale has not flourished much and this has led to a situation of disparity in the service sector. In India, although the production in the tertiary sector increased by 11 times, the employment opportunities increased only by 2.5 times. More than half of the country’s population works in agricultural sector and related activities. This contributes only a quarter of the GDP. In the secondary and tertiary sectors, less than half of the people are employed, but these sectors contribute three-fourths of the country’s GDP.

This peculiar characteristic indicates that there are more people in agriculture than necessary. They are underemployed workers in the agricultural sector. Although they are working in the agricultural fields, their labour is not adding to the production process and output. This situation is called ‘disguised unemployment’. If they work in other sectors, they might contribute to the income of their family. This phenomenon is present even in the other sectors. The daily wage earners in the urban areas, like painters, repair personnel or those doing odd jobs, do not find employment on a daily basis. Casual workers or street sellers work for the whole day but earn a very meagre amount.

Efforts by the government to construct better roads and connect the villages, provision of storage and warehousing facilities, offering cheap credit to the farmers, encouraging initiatives to set up small-scale agro-based industries near agricultural fields will provide better opportunities for gainful employment. Improvement of healthcare facilities and extension of education amongst the children will go a long way to help create jobs in the rural areas. The potential to develop every region can be identified and through proper planning and support from the government, industries like tourism, handicrafts, information technology, etc. can be set up. In 200 districts, the Government of India had introduced the Right to Work called the National Rural Employment Guarantee Act 2005 (NREGA 2005). According to the provisions of this law, the Government will guarantee to provide 100 days of employment in a year, or provide unemployment allowances to the people in lieu.

On the basis of employment conditions


On the basis of employment conditions, the activities are classified as:

  1. Organised sector
  2. Unorganised sector
Organised sector It consists of those enterprises which provide assured work to people in exchange of a regular monthly salary. They are registered by the government and have to follow the rules and regulations laid down by the government. Suitable and secure working conditions such as proper salary, fixed working hours, service benefits such as paid holidays, provident fund, medical benefits, safe working environment are provided by the employer. Thus, the employees enjoy the security of employment. In India, organisations such as Indian Railways, Tata Steel, Reliance Industries Ltd., Oil and Natural Gas Commission are a few examples of enterprises in the organised sector.

Unorganised sector In this sector, the main components are small and scattered units which are largely outside the control of the government. Rules and regulations are not followed compulsorily. There is no job security in this sector. Employees are often low-paid, not regular, enjoy no service benefits and can be terminated at any time by the employer. Casual workers and labourers doing small jobs constitute this sector.

The employment opportunities in the organised sector are much sought after due to the benefits of employment. In India, a number of organised sector enterprises exist in the unorganised sector, where it is possible to evade tax and avoid labour protection laws. Exploitation of the labourers by paying them low wages and no service benefits is a common situation. During periods of lesser demand in the economic cycle, a number of people lose their job in the organised sector and are forced to take up jobs in the unorganised sector. In rural areas, landless agricultural labourers, marginal farmers, village artisans, etc. fall in the category of unorganised sector workers who require government support from exploitation. In urban areas, the workers in small scale industries, casual workers in transport and construction business, etc. need protection for their employment. Thus, workers in the unorganised sector essentially need government protection from disadvantageous terms of employment.

On the basis of ownership of assets and delivery of services

On the basis of ownership of assets and delivery of services, the economic activities are classified as—

  1. Public sector
  2. Private sector

The economic activities can be classified as those in the public sector and in the private sector, on the basis of ownership of assets and responsibility of delivery of services.

In the public sector, the government owns the assets and provides services to the nation. Enterprises such as Indian Railways, Steel Authority of India Limited, Hindustan Aeronautics Limited, Air India etc. are owned and operated by the government agencies. In the private sector, the assets and services are controlled by private individuals or companies. Reliance Industries Limited, Tata Steel, Mahindra and Mahindra, Jet Airways, etc. are some examples of private sector enterprises in India.

The private sector activities are mainly profit-driven, whereas the public sector enterprises raise money from taxes paid by the citizens and provide services which are not always profit-driven. Government takes up large-scale activities for infrastructural development. This requires huge capital investment to serve the people. Providing electricity at a reasonable price, buying agricultural products from the farmers at the minimum support price, operating schools in rural areas in its campaign to spread literacy, providing cheap housing and healthcare facility to the economically-backward sections of the society are some of the services provided by the government in the public sector. Public sector undertakings cater to employment opportunities through large-scale infrastructure development work and by encouraging small-scale and cottage industries.


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