Econ ch 2

• Types of sectoral classification

  • Primary/secondary/tertiary
  • Organised/unorganised
  • Public/private
• It is important to emphasise the changing roles of sectors, particularly the rapid growth of the service sector
• Students may need to be familiarised with fundamental concepts such as Gross Domestic Product and Employment
• The chapter has taken the example of unemployment and what the government can do to solve it
• The declining importance of agriculture and growing importance of industry and services should be related to the experience of the children by taking more examples that they may observe in their day-to-day life
• The key issue of protecting the workers engaged in the unorganised sector should be highlighted
• The GDP data used in this chapter is taken from the Real Time Handbook of Statistics on Indian Economy
• The employment figures are based on data taken from the five-yearly surveys on employment and unemployment conducted by the National Sample Survey Organisation (NSSO) now known as National Statistical Office (NSO)
• There are many activities that are undertaken by directly using natural resources, which form the primary sector
• Primary sector


  Activities that produce goods by exploiting natural resources
• Secondary sector


  Activities that change natural products into other forms through manufacturing
• Tertiary (Service) sector


  Activities that help in the development of the primary and secondary sectors, but do not produce a good directly
• 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 the Gross Domestic Product (GDP) of a country
• The mammoth task of measuring GDP in India is undertaken by a central government ministry, with the help of various government departments of all the Indian states and union territories
• Counting goods and services separately is therefore not correct because then we would be counting the value of the same things a number of times. First as wheat, then as flour and finally as biscuits.
• Gross Domestic Product (GDP)


  The value of all final goods and services produced within a country during a particular year. It shows how big the economy is.
• In India, the mammoth task of measuring GDP is undertaken by a central government ministry. This Ministry, with the help of various government departments of all the Indian states and union territories, collects information relating to total volume of goods and services and their prices and then estimates the GDP.
• Historical Change in Sectors

  • At initial stages of development, primary sector was the most important sector of economic activity
  • As agriculture sector began to prosper, it produced much more food than before. Many people could now take up other activities
  • Over a long time, new methods of manufacturing were introduced, factories came up and started expanding. People who had earlier worked on farms now began to work in factories in large numbers
  • In the past 100 years, there has been a further shift from secondary to tertiary sector in developed countries. The service sector has become the most important in terms of total production.
• What is the total production and employment in the three sectors in India? Over the years have there been changes similar to the pattern observed for the developed countries?
• Graph 1 shows the production of goods and services in the three sectors. This is shown for two years, 1973-74 and 2013-14.
• Rising Importance of the Tertiary Sector in Production


  • Over the forty years between 1973-74 and 2013-14, production in the tertiary sector has increased the most
  • In the year 2013-14, the tertiary sector has emerged as the largest producing sector in India replacing the primary sector
• Reasons for the rising importance of the tertiary sector


  • Basic services required in a developing country like hospitals, educational institutions, post and telegraph services, etc. which the government has to provide
  • Development of agriculture and industry leads to the development of services like transport, trade, storage
  • As income levels rise, people start demanding more services like eating out, tourism, private hospitals, private schools, etc.
  • New services based on information and communication technology have become important and essential
• Not all of the service sector is growing equally well. At one end there are highly skilled and educated workers, at the other end there are a very large number of workers engaged in services like small shopkeepers, repair persons, transport persons, etc. who barely manage to earn a living.
• While there has been a change in the share of the three sectors in GDP, a similar shift has not taken place in employment. The primary sector continues to be the largest employer even now.
• Even though industrial output or the production of goods went up by more than nine times during the period, employment in the industry went up by around three times. The same applies to the tertiary sector as well. While production in the service sector rose by 14 times, employment in the service sector rose around five times.
• More than half of the workers in the country are working in the primary sector, mainly in agriculture, producing only about one sixth of the GDP. In contrast to this, the secondary and tertiary sectors produce the rest of the produce whereas they employ less about half the people.
• Underemployment


  A situation where people are apparently working but all of them are made to work less than their potential. This is also called disguised unemployment.
• Even if we remove a lot of people from the 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.
• There are lakhs of farmers like Laxmi in India who are underemployed. 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.
• Underemployment can also happen in other sectors like the service sector where there are thousands of casual workers who search for daily employment.
• How to Create More Employment

  • Invest in irrigation infrastructure like wells, dams, canals to increase agricultural productivity and employment
  • Invest in transportation and storage infrastructure to help farmers sell their produce
  • Provide access to seeds, fertilizers, agricultural equipment to farmers
• Application and harvesting can employ two more members of the family in her own field
• Construction of a new dam and canals to irrigate many farms could lead to a lot of employment generation within the agricultural sector itself reducing the problem of underemployment
• If the government invests in transportation and storage of crops, or makes better rural roads so that mini-trucks reach everywhere, several farmers can continue to grow and sell these crops. This activity can provide productive employment to not just farmers but also others such as those in services like transport or trade
• Laxmi's need is not confined to water alone. To cultivate the land, she also needs seeds, fertilisers, agricultural equipment and pumpsets to draw water. Being a poor farmer, she cannot afford many of these. If the local bank gives her credit at a reasonable rate of interest, she will be able to buy all these in time and cultivate her land
• Along with water, we also need to provide cheap agricultural credit to the farmers for farming to improve
• Another way to tackle this problem is to identify, promote and locate industries and services in semi-rural areas where a large number of people may be employed
• Industries and services in semi-rural areas

  • Dal mill to procure and process pulse crops
  • Cold storage to store products like potatoes and onions
  • Honey collection centres in villages near forest areas
  • Industries that process vegetables and agricultural produce
• In India about 60 per cent of the population belongs to the age group 5-29 years, but only about 51 per cent are attending educational institutions
• If children not attending school are to attend, it will require more buildings, more teachers and other staff. This can create nearly 20 lakh jobs in the education sector alone