Class 10 Notes

Class 10 Social Science Notes Chapter 2 (Sectors of the Indian economy) – Understanding Econimic Development Book

Philoid

Philoid

— 7 min read

Understanding Econimic Development
Alright, let's get straight into Chapter 2: Sectors of the Indian Economy. This is a fundamental chapter for understanding how our economy functions and is structured. Pay close attention, as concepts here are frequently tested in various government exams.

Chapter 2: Sectors of the Indian Economy - Detailed Notes

1. Introduction: Economic Activities

  • Economic activities are those activities that generate income. They are broadly classified based on different criteria.

2. Classification Based on the Nature of Economic Activity
This classification focuses on what is produced.

  • a) Primary Sector:

    • Definition: Involves activities that directly use natural resources. It forms the base for all other products.
    • Focus: Exploitation of natural resources like land, water, vegetation, minerals.
    • Examples: Agriculture (farming, dairy), Fishing, Forestry, Mining, Quarrying.
    • Also Known As: Agriculture and related sector (due to the dominance of agriculture).

  • b) Secondary Sector:

    • Definition: Involves activities in which natural products are changed into other forms through ways of manufacturing. It involves industrial activity.
    • Focus: Processing of natural resources; manufacturing. The product is not produced by nature but has to be made.
    • Examples: Manufacturing (e.g., converting cotton into cloth, sugarcane into sugar/gur), Construction, Electricity generation, Gas and water supply.
    • Also Known As: Industrial sector.

  • c) Tertiary Sector:

    • Definition: Involves activities that help in the development of the primary and secondary sectors. These activities, by themselves, do not produce a good but they are an aid or support for the production process.
    • Focus: Providing services.
    • Examples: Transportation, Storage (Warehousing), Communication (Post, Telecom), Banking, Insurance, Trade (Retail, Wholesale), Real Estate, Public Administration, Education, Health, Tourism, IT services, various personal services (barber, tailor, etc.).
    • Also Known As: Service sector.

  • Interdependence of Sectors: All three sectors are highly interdependent.

    • Primary provides raw materials for Secondary.
    • Secondary processes materials and provides manufactured goods (like tractors, fertilizers) used in Primary.
    • Tertiary provides crucial services (transport, banking, storage, trade) that support both Primary and Secondary activities.

3. Comparing the Three Sectors: GDP and Historical Changes

  • a) Measuring Production - Value of Goods and Services:

    • To compare sectors, we measure the value of goods and services produced, not the volume (you can't add cars + wheat + nails directly).
    • Problem: How to avoid double counting? (e.g., counting wheat, then flour, then bread separately overestimates production).
    • Solution: Count the value of Final Goods and Services only.
      • Final Goods: Goods that reach the final consumer (e.g., bread purchased by a household).
      • Intermediate Goods: Goods used up in producing final goods (e.g., wheat and flour used to make bread). The value of intermediate goods is already included in the value of the final good.
    • Alternatively, one can sum up the Value Added at each stage of production.

  • b) Gross Domestic Product (GDP):

    • Definition: The value of all final goods and services produced within a country during a particular year.
    • Significance: GDP indicates the size of a country's economy.
    • Calculation in India: Undertaken by a central government ministry (National Statistical Office - NSO, under the Ministry of Statistics and Programme Implementation).

  • c) Historical Change in Sectors:

    • Developed Countries (Historical Pattern):
      • Initial Stage: Primary sector dominance (employment and GDP).
      • Industrial Revolution: Shift towards Secondary sector dominance (manufacturing grew, people moved from farms to factories).
      • Later Stage: Shift towards Tertiary sector dominance (services became most important for GDP and employment).
    • India's Experience:
      • GDP Share: India has followed the pattern of shifting importance from Primary -> Secondary -> Tertiary in terms of contribution to GDP. The Tertiary sector now contributes the largest share to India's GDP.
      • Employment Share: However, the shift in employment has not been similar. The Primary sector continues to be the largest employer (employing nearly half the workforce), even though its share in GDP has fallen significantly. The Secondary and Tertiary sectors have not created enough jobs to absorb the surplus labour from agriculture.

  • d) Rising Importance of the Tertiary Sector in Production:

    • Reasons:
      1. Basic Services: Growing need for services like hospitals, schools, police, courts, banks, transport etc., considered basic in a developing country.
      2. Development of Primary & Secondary: Growth in agriculture and industry leads to increased demand for services like transport, trade, storage.
      3. Rising Income Levels: As incomes rise, people demand more services like tourism, shopping, private hospitals, professional training.
      4. New Services: Growth of Information and Communication Technology (ICT) has led to new essential services (internet cafes, IT services, call centers).
    • Note: Growth in the service sector in India is diverse. It includes high-skilled, high-paying jobs as well as low-skilled, low-paying jobs.

4. Where are Most People Employed?

  • As noted above, the Primary sector employs the largest share of the workforce in India (around 44-49% depending on the specific year/data source, but significantly higher than its GDP contribution).
  • This indicates a problem: workers in the agricultural sector are producing less (in terms of value) compared to workers in other sectors.

5. Underemployment (or Disguised Unemployment)

  • Definition: A situation where people are apparently working but all of them are made to work less than their potential. Even if some people are removed from the work, production will not be affected. It's a situation of hidden unemployment.
  • Prevalence: Common in the agricultural sector in India (e.g., a family farm has 5 members working, but the work actually requires only 3; the extra 2 are underemployed).
  • Also found in: Casual workers in the urban service sector (painters, plumbers waiting for work), small shopkeepers.
  • Implication: Low productivity and low income for those involved.

6. How to Create More Employment?

  • Short-term & Long-term Strategies:
    • Diversification of Agriculture: Promote activities like horticulture, animal rearing, fisheries.
    • Agro-based Industries: Setting up industries (like food processing) in rural or semi-rural areas.
    • Infrastructure Development: Investing in roads, transportation, storage facilities creates direct construction jobs and indirect jobs by facilitating economic activity.
    • Credit: Providing cheap agricultural credit to farmers for inputs and diversification.
    • Education & Health: Investing in education and health infrastructure creates jobs in these sectors and improves the quality of the workforce.
    • Tourism: Promoting regional tourism and crafts can generate local employment.
    • Government Schemes: Implementing employment generation schemes.
      • MGNREGA 2005 (Mahatma Gandhi National Rural Employment Guarantee Act 2005):
        • Guarantees 100 days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work.
        • Aims to provide a safety net and create durable assets in rural areas.
        • It's a 'Right to Work'. If the government fails to provide employment, it must give unemployment allowances.

7. Division of Sectors based on Working Conditions/Rules & Regulations

  • a) Organised Sector:

    • Definition: Enterprises or places of work where the terms of employment are regular, and people have assured work. They are registered by the government and follow its rules and regulations (e.g., Factories Act, Minimum Wages Act, Shops and Establishment Act).
    • Characteristics:
      • Job security.
      • Fixed working hours (overtime pay if working more).
      • Paid leave, holidays, provident fund, gratuity.
      • Medical benefits, pensions (often).
      • Formal processes and procedures.
    • Examples: Government employees, workers in large registered companies, banks.

  • b) Unorganised Sector:

    • Definition: Small and scattered units which are largely outside the control of the government. Rules and regulations are generally not followed.
    • Characteristics:
      • Jobs are low-paid and often irregular.
      • No job security (can be asked to leave without reason).
      • No provision for overtime, paid leave, holidays, sick leave.
      • No benefits like provident fund or health insurance.
      • Employment is not secure.
    • Examples: Workers in small workshops, casual labourers in construction/trade/transport, street vendors, headload workers, domestic workers, landless agricultural labourers, small/marginal farmers.
    • Need for Protection: Workers in the unorganised sector are vulnerable and need protection regarding wages, safety, and social security. This is especially true for vulnerable groups like SCs, STs, and OBCs who often find themselves in this sector.

8. Division of Sectors based on Ownership of Assets

  • a) Public Sector:

    • Definition: The government owns most of the assets and provides all the services.
    • Objective: Primarily social welfare, not just profit maximization. Governments raise money through taxes etc., to meet expenses.
    • Examples: Indian Railways, Post Offices, BSNL (partially), Public Sector Banks (like SBI), Defence undertakings, many infrastructure projects.
    • Role: Provides essential services (often at reasonable costs), undertakes large infrastructure projects, ensures availability of certain goods/services.

  • b) Private Sector:

    • Definition: Ownership of assets and delivery of services is in the hands of private individuals or companies.
    • Objective: Primarily profit maximization.
    • Examples: Reliance Industries Limited (RIL), Tata Consultancy Services (TCS), Infosys, most shops, farms, factories owned by individuals/companies.

Conclusion:
Understanding the structure of the economy into these various sectors helps analyze its performance, challenges (like unemployment, underemployment, vulnerability of unorganised sector workers), and the role of government policy in steering economic development and ensuring social welfare.

Multiple Choice Questions (MCQs) for Practice:

  1. Activities like agriculture, fishing, and forestry fall under which sector?
    a) Secondary Sector
    b) Tertiary Sector
    c) Primary Sector
    d) Organised Sector

  2. The value of all final goods and services produced within a country during a particular year is called:
    a) Net Domestic Product (NDP)
    b) Gross National Product (GNP)
    c) Gross Domestic Product (GDP)
    d) National Income (NI)

  3. Which of the following is an example of a Tertiary sector activity?
    a) Manufacturing cars
    b) Weaving cloth from cotton
    c) Providing banking services
    d) Mining iron ore

  4. Why is the value of intermediate goods NOT included in the calculation of GDP?
    a) They are not important for the economy.
    b) Their value is already included in the value of final goods, avoiding double counting.
    c) It is too difficult to calculate their value.
    d) They are only produced in the primary sector.

  5. Disguised unemployment (underemployment) is most commonly found in which sector in India?
    a) Organised Sector
    b) Public Sector
    c) Agricultural (Primary) Sector
    d) Secondary Sector

  6. Which sector has emerged as the largest producing sector in India in recent decades, in terms of contribution to GDP?
    a) Primary Sector
    b) Secondary Sector
    c) Tertiary Sector
    d) Public Sector

  7. Which of the following is NOT a characteristic of the Organised Sector?
    a) Job security
    b) Paid leave and holidays
    c) Irregular and low-paid jobs
    d) Registration with the government

  8. The primary objective of the Public Sector is:
    a) Profit maximization
    b) Social welfare and providing essential services
    c) Export promotion
    d) Employing the maximum number of people

  9. MGNREGA 2005 guarantees how many days of wage employment to rural households?
    a) 50 days
    b) 100 days
    c) 150 days
    d) 365 days

  10. Which of the following activities belongs to the Secondary Sector?
    a) A farmer harvesting crops
    b) A call centre providing customer support
    c) A factory manufacturing furniture from wood
    d) A teacher teaching in a school

Answer Key for MCQs:

  1. c) Primary Sector
  2. c) Gross Domestic Product (GDP)
  3. c) Providing banking services
  4. b) Their value is already included in the value of final goods, avoiding double counting.
  5. c) Agricultural (Primary) Sector
  6. c) Tertiary Sector
  7. c) Irregular and low-paid jobs (This is characteristic of the Unorganised Sector)
  8. b) Social welfare and providing essential services
  9. b) 100 days
  10. c) A factory manufacturing furniture from wood

Revise these notes thoroughly. Focus on the definitions, examples, key differences between sectors, and the specific issues like underemployment and the unorganised sector in the Indian context. Good luck with your preparation!

Read more