Classification of Sectors of Indian Economy:

An economy is best understood when we study its components or sectors. Sectoral classification can be done on the basis of several criteria. In this article, three types of classifications are discussed:

• Primary, Secondary and Tertiary; 
• Organised and Unorganised; and
• Public and Private.

What are the primary sectors of Indian economy?

• Many activities in the economy rely on the direct utilization of natural resources, forming the primary sector of Indian economy. 
• The activities that involve the exploitation of natural resources are part of the primary sector, which serves as the foundation for subsequent product manufacturing. 
• Agriculture and related sector: Given that agriculture, dairy farming, fishing, and forestry are the primary sources of natural products, this sector is also referred to as the 
• Example of Primary Sectors of Indian Economy: 
  • Cotton cultivation depends largely on natural factors like rainfall and climate, resulting in the production of the natural product, cotton. 
  • Dairy farming relies on biological processes and the availability of fodder to produce milk, another natural product. 
• Minerals and Ores also fall into the category of natural products. 

Secondary Sector of Indian Economy: Industrial Transformation in Sectors of Indian Economy

• Manufacturing and Industrial Transformation in the Sectors of Indian Economy: The secondary sector encompasses activities that involve transforming natural products into different forms through manufacturing processes typically associated with industrial activities.
  • In this sector, products are not naturally occurring but are instead created through manufacturing processes, which can take place in a factory, workshop, or even at home. 
  • It follows the primary sector in the production process. 
• Example Secondary Sector of Indian Economy:
  • Cotton fibers from plants are used to produce yarn and weave cloth.
  • Sugarcane, as a raw material, is processed to make sugar or gur. 
  • Earth can be converted into bricks, which are then used in constructing houses and buildings. 
• The Secondary Sector of Indian Economy is often referred to as the industrial sector because it became closely associated with various types of industries over time.

Tertiary Sector of Indian Economy: Powering Services and Support Functions

• The tertiary sector of Indian Economy activities primarily support and facilitate the development of the primary and secondary sectors of Indian Economy. 
  • Aids the production: They do not directly produce tangible goods, they play a crucial role in aiding the production process. 
  • Example Tertiary Sector of Indian Economy:
    • Products manufactured in the primary or secondary sectors often require transportation via trucks or trains and are subsequently sold in wholesale and retail shops.
    • Occasionally, storage in warehouses (godowns) becomes necessary. 
    • Communication services such as talking over the telephone or sending letters, banking services like borrowing money.
    • Trade activities are essential elements of this sector. 
• Service Sector: Pillar of Tertiary Activities: As these activities provide services rather than physical goods, the tertiary sector is also known as the service sector.
• Service Sector : A Spectrum of Diverse Functions: The service sector encompasses activities that directly support the production of goods.
  • It also provides essential services unrelated to physical goods production. 
  • Example: 
    • It includes professions like teachers and doctors, 
    • Providers of personal services such as washermen, barbers, cobblers, lawyers etc.
    • Individuals engaged in administrative and accounting roles.
• Service Sector: Transformative Evolution: The service sector has evolved to include modern services like internet cafes, ATM booths, call centers, software companies, and other information technology-based services, which have gained significant importance in recent times.

How do the three sectors of Indian economy compare in terms of production, employment, and impact on growth?

The primary, secondary, and tertiary sectors collectively generate a vast array of goods and services. These sectors also employ a significant workforce to produce these goods and services. To gain a comprehensive understanding of an economy, it’s crucial to assess the quantity of goods and services produced and the number of people employed within each sector.

How are goods and services valued to calculate the GDP of each sector of Indian economy?

• Value of Goods and Services for Practicality: 
  • To determine the total production in each sector and ultimately calculate the Gross Domestic Product (GDP) of a country.
  • Economists use the values of goods and services produced rather than adding up the actual quantities, which would be an enormous and impractical task.
  • Example: 
    • If 10,000 kgs of wheat are sold at Rs 20 per kg, the value of the wheat would be Rs 2,00,000. 
    • The value of 5000 coconuts at Rs 15 per coconut would be Rs 75,000. 
  • This approach is applied to calculate the values of goods and services in the primary, secondary, and tertiary sectors of Indian Economy, and these values are then added up.
• Intermediate Goods: such as raw materials like wheat, are not counted individually because their value is already included in the value of the final goods they contribute to, counting them separately would result in double-counting.
• Only Final Goods and Services: Hence, it’s essential to consider only final goods and services in the calculation. Final goods are those that reach consumers and are ready for consumption.
  • The total value of final goods and services produced in each sector during a specific year constitutes the sector’s total production for that year. 
• Gross Domestic Product: Summing up the production values of the three sectors gives the  (GDP) of a country. 
  • GDP is a crucial indicator of an economy’s size and is measured by a central government ministry, often in collaboration with various government departments from all states and union territories. 
  • These agencies collect data on the total volume and prices of goods and services and use this information to estimate the GDP.

How have Sectors of Indian Economy Evolved Historically, Impacting Growth and Transformation?

• Agriculture or Primary Sector: A Historical Pillar in Developed Economies
  • In the histories of many developed countries, it’s been observed that the primary sector was initially the most significant economic activity. 
• Surplus Agriculture: A Catalyst for Diverse Economic Activities
  • As agriculture evolved and became more productive, it generated surplus food, allowing people to engage in various other activities. 
• Economic and Social Transformation: Catalysts for Growth and Diverse Professions
  • This led to the growth of craftspersons, traders, and increased buying and selling activities. 
  • Additionally, there was a rise in professions such as transportation, administration, and the military.
• Early Economy: Primacy of Natural Products and Labor in the Primary Sector
  • However, during this phase, most goods produced were natural products from the primary sector, and a substantial portion of the population worked in this sector.

• Industrial Revolution: Factories Rise, Workforce Transition
  • For over a century, new manufacturing methods led to the emergence and expansion of factories. 
  • Many individuals who had previously worked in agriculture transitioned to factory jobs, often due to historical factors.
• The Dominance of the Secondary Sector: Production and Employment in Focus
  • People began consuming more factory-produced goods at affordable prices, leading to the secondary sector becoming the dominant sector in terms of both production and employment.
• Transforming Economies: The Shift from Secondary to Tertiary Sectors
  • In the past century, another transformation has taken place in developed countries, where there has been a shift from the secondary to the tertiary sector.
  • The service sector has become the most prominent contributor to total production, and most employed individuals work in this sector.
  • This shift towards a service-oriented economy is a common trend in developed nations.