What is economy?
- The economy is a system that manages the production, distribution and consumption of goods and services. It is a combination of all the economic activities of society.
What is economic activity?
- Those activities by which income is earned for livelihood are called economic activities.
On the basis of economic activities, Indian economy has been classified into three sectors
1. Primary areas
- The primary sector is the sector in which goods are produced using natural resources, it is also called agriculture and allied sector. Such as agriculture, animal husbandry, mining
2. Secondary fields
- The sector in which new goods are manufactured using goods obtained from the primary sector is called the secondary sector. It is also called the industrial sector, the manufacturing sector. Example: Making thread from cotton or sugar from sugarcane juice, making chairs from wood.
3. of the tertiary sector
- Tertiary sector helps in production activities of primary and secondary sector. It is also called service sector. Example: banking, transportation etc.
Basis of comparison of three sectors
Goods and services are produced from various production activities of primary, secondary and tertiary sectors. They can be compared on the basis of –
- In which sector is the production higher?
- How many people work in which sector?
- Which sector is bigger and which is smaller in terms of total production and employment in the economy.
Counting the various goods and services of each sector in the country
- Thousands of goods and services are produced in all three sectors and counting them is an impossible task.
Economists have argued that the sum of the value of goods and services is correct, therefore
- For all the three sectors only the value of 'final goods and services' is calculated and then the sum is obtained.
- Why are only 'final goods and services' counted?
- To avoid the problem of double counting, only final goods and services are always used.
What is the double counting problem
- A farmer sells wheat to a flour mill at the rate of ₹ 20 per kg.
- After grinding the wheat, the flour is sold to the biscuit company at the rate of ₹ 25 per kg.
- The biscuit company uses ingredients like sugar and oil along with flour and makes four packets of biscuits. It sells the biscuits to consumers in the market for ₹ 80.
- Therefore, only the final price of the biscuits will be taken into account so that all the regions can be calculated together.
gross domestic product
Gross Domestic Product (GDP)
- The sum of the values of final goods and services produced by the three sectors in a particular year provides information about the total output of the sector in that year.
- This is called the gross domestic product of a country which shows the vastness of the economy of any country.
- In India this work is done by the Ministry of the Central Government.
Historical changes in sectors
- The primary sector has been the most important sector of economic activity in the initial stages of development of most developed countries.
1. Agricultural sector
- Changes in the agricultural system led to increased production and people began to take up other jobs, which led to an increase in the number of craftsmen and traders, and also people began to take up jobs in transportation, administration and the military.
2. Manufacturing sector
- After a long period (more than a hundred years) factories came into existence due to the introduction of a new system of manufacturing. Many more people than those who earlier used to work in the fields now started working in factories. The secondary sector became the most important in terms of total production and employment.
3. The service sector
- In the last 100 years, there has been a shift from the secondary sector to the tertiary sector in developed countries. The importance of the service sector has increased in terms of total production. Most of the working people are employed in the service sector. This is a common feature observed in developed countries.
The growing influence of the tertiary sector
- In India, although production increased in all sectors in the last fifty years, the highest increase was in the production of the tertiary sector. Why did the tertiary sector become so important? There can be many reasons for this.
1. Firstly , in any country, there is a need for many services like hospitals, educational institutions, post and telegraph services, police stations, courts, rural administrative offices, municipal corporations, defence, transport, banks, insurance companies etc. These are considered basic services. In a developing country, the government takes the responsibility of managing these services.
2. Secondly , the development of agriculture and industry leads to the development of services like transportation, trade, storage. The more the development of the primary and secondary sectors, the greater will be the demand for such services.
3. Third , as income increases, some people start demanding many other services like restaurants, tourism, shopping, private hospitals, private schools, vocational training, etc. This change can be seen especially in big cities.
4. Fourth, in the past decades some new services based on information and communication technology have become important and indispensable.
Unemployment
- Unemployment is a situation when people have the desire and ability to work, but they have no opportunity to get work. It is seen in all three sectors of the economy
1. More people are engaged in agriculture than required Even if you remove some people from the agriculture sector, production will not be affected. Where people are working directly, but everyone works less than their potential, this is also called underemployment or disguised unemployment.
2. Underemployment can also occur in other sectors. For example, people do not always get work in the manufacturing sector.
3. In cities, there is low unemployment in the service sector. There are thousands of casual workers who look for daily employment. Such as plumbers, painters, repair workers, street vendors, they also do not always get employment.
How to create additional employment?
1. Some ways of additional employment
- The government can spend some money or the bank can provide loans
- There is also a need to provide cheap agricultural credit to farmers.
- To identify and promote industries and services in semi-rural areas that can employ a large number of people.
- To undertake projects involving the construction of roads, bridges, railways, and other infrastructure.
2. Income generating sectors by Niti Aayog
- According to a study conducted by NITI Aayog, about 20 lakh jobs can be created in the education sector alone.
- There will be a need for more doctors, nurses and health workers working in rural areas.
- According to the study of Planning Commission, if there is improvement in tourism sector then we can provide additional employment to more than 35 lakh people every year.
Mahatma Gandhi National Rural Employment Guarantee Act
(MGNREGA)
- The Central Government made a law to implement the right to work in about 625 districts of India, it is called Mahatma Gandhi National Rural Employment Guarantee Act-2005.
- Under this, all those people who are capable of working and are in need of work, have been guaranteed 100 days of employment in a year in rural areas by the government.
- If the government fails to provide employment, it will give unemployment allowance to the people. Under the Act, priority will be given to such works which will help in increasing production from the land in future.
Division of organised and unorganised sector
1. of the organized sector
- The organised sector includes those enterprises or workplaces where the employment periods are regular and hence people have assured work.
- Those sectors are registered by the government and have to comply with the government rules and regulations.
- These rules and regulations are mentioned in various laws like, Factories Act, Minimum Wages Act, Service Subsidy Act, Shops and Establishments Act, etc.
Facilities in Organized Sectors:-
- They get paid leave, leave payment, provident fund, service grant etc.
- They are entitled to get medical benefits and as per the rules the factory owner has to ensure facilities like drinking water and safe working environment.
- When they retire, they also receive a pension.
2. of the unorganized sector
- The unorganised sector is outside the government control, there are rules and regulations in this sector but they are not followed.
- They are low-paid jobs and are often not regular. There is no provision for overtime, paid leaves, holidays, sick leave, etc.
- Employment is not secure. Workers can be fired without any reason. In some seasons when there is less work, some people are laid off from work.
Protection of workers in the unorganised sector
- Due to unemployment, people are forced to work in the unorganized sector where the salary is very low and the work is not regular.
1. In rural areas, the unorganised sector consists mainly of landless agricultural labourers, small and marginal farmers, sharecroppers and artisans (like weavers, blacksmiths, carpenters and goldsmiths).
2. The unorganised sector in urban areas consists mainly of workers in small-scale industries, casual workers engaged in construction, trade and transport, and workers such as street vendors, head load workers, garment manufacturers and rag-pickers.
3. We also find that majority of the workers are from Scheduled Castes, Tribes and Backward Classes, who are employed in the unorganised sector.
of ownership-based sectors
1. Public sector
- In the public sector, most of the assets are owned by the government and the government provides all the services.
- Railways or post offices are examples of public sector
- The aim of the public sector is not only to earn profit but also to establish social justice
- For example, construction of roads, bridges, railways, ports, electricity etc. and providing irrigation facilities through dams etc.
- Providing health and education facilities.
2. Private sector
- In the private sector, ownership of assets and responsibility for delivery of services is in the hands of a single individual or company.
- Companies like Tata Iron and Steel Company Limited (TISCO) or Reliance Industries Limited are examples of private ownership.
- The aim of private sector activities is to earn profit. We have to pay these sole proprietors and companies to avail their services.
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