Economics Notes (Class 10)

CBSE Class 10 Economics Chapter 2 Sector of Indian Economy

Class Notes of Chapter 2: Sector of Indian Economy
Class 10th Economics

Sector of Indian Economy 


  • Important Notes
  • Important Questions

Important Notes

  • All activities that give an income in return are called economic activities. Example, people going to work in factories, banks, schools, etc.
  • Economic activities can be classified into different sectors on the basis of nature of work.
  • Primary Sector: Goods which are produced by exploiting natural resources come under the category of the primary sector. This sector is also called agriculture and related sector, e.g. – cotton which is a natural product.
  • Secondary sector : Transformation of one good into another comes under the category of secondary sector. Manufacturing is one of the important components of this sector. Example : Transformation of sugarcane into sugar.
  • Tertiary sector : All production units producing services which help in the development of primary and secondary sectors come under the category of the tertiary sector. This is also known as the service sector. Example – Services given by doctors, teachers, lawyers etc.
  • These three sectors are highly interdependent on one another. This can be explained with the help of an example : Farmers buy goods such as tractors, pumpsets, fertilisers (manufacturing sector) to produce agricultural goods (primary sector). This shows the dependence of the primary sector on the secondary sector. Now farmers want to sell their output. For this, they need transport facilities. It shows the dependence of the primary sector on tertiary sector.
  • There are thousands of goods and services produced in an economy. We cannot add different types of goods in practice. So the value of these goods and services should be used rather adding up the actual numbers.
  • Comparison can be done among these three sectors on the basis of the value of final goods and services produced.
  • 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 these sectors gives us the gross domestic product (GDP) of a country.
  • Tertiary sector has emerged as the largest sector because it helps in the development of primary and secondary sectors.
  • Several services such as hospitals, banks, insurance companies, transport, educational institutions are the basic services which are required by primary and secondary sectors for their normal functioning.
  • Organised sector covers those enterprises or places of work where the terms of employment are regular. They are registered by the government and have to follow its rules and regulations. Therefore people have job security.
  • Unorganised sector covers small and scattered units which are largly outside the control of the government. There are rules and regulations but they are generally not being implemented by the unorganised sector. Employment is not secure in the unorganised sector.
  • In unorganised sector protection and support is required for the workers for their economic and social development. Besides getting irregular and low paid work, they also face social discrimination.
  • Public sector is the sector which is owned, controlled and managed by the government. Activities in the government sector are guided by the motive of social welfare and not to earn the profit.
  • In the private sector ownership of production, units is in the hands of private individuals. Activities in the private sector are mainly guided by the motive to earn a profit. Example : TISCO and RIL.
  • Employment is an activity from which a person earns the means of living, i.e. income in cash or in kind.
  • Unemployment refers to a situation where the persons who are able to work and are willing to work, fail to secure work.
  • Underemployment is a situation in which a worker gets work for less time than the time he can work. In other words, he remains unemployed for some months is a year or some hours every day.
  • There was a big change in the share of three sectors in G.D.P. (from 1973 to 2000) but data show that such similar shift has not been taken place in terms of employment.
  • In secondary sector output went up by 8 times but in terms of employment it rose up by only 2.5 times.
  • In tertiary sector output went up 11 times whereas employment rose up 3 times.
  • Government can create more employment opportunities by providing better infrastructure such as roads, dams, canals etc. Further, this can be enhanced by providing services like banks, transport and communication.
  • Set up industries that process vegetables and agricultural produce like potatoes, rice, wheat, tomato, fruits which can be sold in outside markets. This will provide employment in industries located in semi-rural areas.
  • Mahatma Gandhi National Rural Employment Guarantee Programme-2005 (NREGA-2005)
  • This act is implemented as “Right to Work” in all the 604 districts of India. Under this act, all those who are able to work and are in need of work have been guaranteed 100 days of employment in a year by the government. However, only one person per family is entitled to this benefit.

Important Questions

Q. Name the sector that is the largest employer in India. Why does this sector produce only a quarter of the National GDP?
A. The agricultural sector (Primary) is the largest employer in India. Nearly 51% of the population is engaged in this section in one way or the other. However, its share in the national GDP is very less because of the following reasons are:
  • The average size of the land holdings is very low which results in low productivity per holder.
  • Less use of modern technology and know-how among farmers to increase crop productivity.
  • The systems of providing financing and marketing facilities have been insufficient since independence. The farmers are not able to get benefits fr6m the loan facilities and access to large markets.
  • The absence of alternative income-generating activities in rural areas gives rise to disguised unemployment where the efficient labor force is not used to its optimum.
Q. How far is it correct to say that several services which cannot be provided by the private sector can be provided by the public sector? Explain.

A. A few examples of public sector activities are Indian Railways, water, electricity board and modes of transport.

There are several necessities of common man, but it is not possible for the private sector to provide all these things at a reasonable cost. For example, water and electricity are the basic needs of everyone. If the work of providing these are given to the private sector then the latter can exploit this opportunity by selling the same at high rates. Therefore the supply of basic amenities is given to the government so that it provides these facilities to the people at low and affordable rates, ensuring the smooth and uninterrupted supply to the public.

Q. What constitutes the unorganized sector in urban areas? Why do workers in this area need protection?

A. In the urban areas, unorganized sector comprises mainly small-scale industry, casual workers in construction, trade, and transport, street vendors, head-load workers, garment makers, ragpickers, etc. All these workers constitute the unorganized sector in urban areas.

A majority of workers in the unorganized sector are from scheduled castes scheduled tribes and backward communities. Workers in unorganized sector urban areas need protection because, besides getting the irregular and low- paid work, these workers also face social discrimination. They are looked down upon by the people in urban areas. Protection and support to the unorganized sector workers are thus necessary for both economic and social development.

Q. How does the service sector help in the development of primary and secondary sectors?

A. After primary and secondary sectors, there is a third sector called the service sector also known as a tertiary sector. Activities that fall under the service sector help in the development of the primary and secondary sectors by not directly producing a good but helping these sectors by activities that are an aid or a support for the production process.
For example, goods that are produced in the primary or secondary sector would need to be transported by trucks or trains and then sold in wholesale and retail shops. At times, it may be necessary to store these goods in godowns. We may also need to talk to others over the telephone or send letters (communication) or borrow money from banks (banking) to help production and trade. Transport, storage, communication, banking, and trade are some examples of service or tertiary sector.
Since these activities generate services rather than goods, they promote primary and secondary sectors by providing expertise, finance, transportation, advertisement, etc.

Q. With the example of sugar cane, explain the interdependence of all the three sectors of the economy.

A. Primary Sector: Cultivation of Sugarcane

Secondary Sector: Processing of sugarcane to make sugar
Tertiary Sector:

  • Transportation of sugar cane into factories for processing it into sugar.
  • Transportation of sugar packs to various markets. 
  • Sale of sugar by wholesalers and retailers.

So, the process starts when the sugar is cultivated. Since cultivation is part of agriculture, it comes in the primary sector. After the cultivation, the sugar cane is processed to make sugar in the factories, which is an industrial process and thus comes in the secondary sector. After which, the sugar is transported to various markets, where it is sold by retailers and wholesalers which is part of the tertiary sector.

Q. Explain the working condition of workers in the unorganized sector.

A. The following points show the working condition of workers in the unorganized sector:

  •  The unorganized sector is characterized by small and scattered units, which are largely outside the control of the government.
  • There are rules and regulations but these are not followed.
  • Jobs here are low-paid and often not regular.
  • The condition of workers in the unorganized sector is not good or stable.
  • There is no provision for overtime, paid leave, holidays, leave due to sickness, etc.
  • Employment is not secure. People can be asked to leave without any reason. When there is less work, such as during some seasons, some people may be asked to leave.
  • A lot also depends on the whims of the employer.
  • This sector includes a large number of people who are employed on their own, doing small jobs such as selling things on the street or doing repair work.

Q. Give five reasons for the rising importance of the tertiary sector in production.

A. Over the forty years, between 1970 and 71, and 2010 and 11, while production in all the three sectors has increased, it has increased the most in the tertiary sector. The following factors are making the tertiary sector important in India.

  • Basic Services – In any country, several services such as hospitals, educational institutions, post and telegraph services, police stations, courts, village administrative offices, municipal corporations, defense, transport, banks, and insurance companies, are required. These can be considered as basic services. In a developing country, the government has to take responsibility for the provision of these services.
  • Development of Primary and Secondary Sectors – The development of agriculture and industry leads to the development of services such as transport, trade, and storage. The greater the development of the primary and secondary sectors, the more would be the demand for such services.
  • Rise in Income Level – As income levels rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, and professional training centers. We can see this change quite sharply in cities, especially in big cities.
  • Rise in Information Technology – Over the past decade or so, certain new services, such as those based on information and communication technology have become important and essential. The production of these services has been rising rapidly.
  • Globalization – Due to globalization, people have become aware of new services and activities, and communication because of which the tertiary sector has gained importance.
Q. The rising importance of the tertiary sector in production in the present times. Discuss.

A. Over the past 30 years, while production has increased in all 3 sectors, it has increased the most in the tertiary sector.
The reasons for the fast development of the tertiary sector in India are as follows:-
1. The necessity for ‘basic services’ like hospitals, educational institutions, post and telegraph services, police stations, courts, administrative offices, defense, transport, and banking services have increased with the increase in population.
2. The development in the Agricultural and Industrial sectors has increased the need for services such as transportation, storage, and trade.
3. As the income of the people increased the demand for services in tourism, retailing, catering and elite education also increased.
4. With higher income people have started traveling long distances for work and education, resulting in the need for increased services in the transport and communication sector.

Q. How do we create more employment in the agricultural sector?

A. More employment can be created in the Agricultural sector if the government takes the following steps.
1. Loans could be given to farmers to dig wells to irrigate their land.
2. Seeds and fertilizers could be subsidized.
3. Dams can be built to irrigate dry areas.
4. Transport facilities could be increased.
5. Storage facilities could be provided.
6. Industries and other service-related companies could be relocated in rural areas so that the underemployed people of the agricultural sector could find work.
7. More schools could be started to educate the rural population to help them become employable, as underemployment is prevalent among farmers.

Q. Discuss the historical changes in the three economic sectors.

A. As we look through the pages of history we can see that a few hundred years ago the Primary sector (Agricultural sector) was most predominant in the world.
Slowly as methods of farming improved and the surplus food was produced man channelized his energy towards the manufacturing of goods. Industries flourished and soon the Secondary sector gained prominence. The Agricultural sector also flourished due to the invention and manufacture of modern agricultural tools.
In this present era with the rising world population and rising income, the Tertiary sector (Service Sector) is gaining prominence. This is already evident in the developed nations and the change will soon be seen in the developing nations also.

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