NCERT Notes Class 10 Social Science Economics Chapter 2 Sectors of the Indian Economy

NCERT Notes Class 10 Social Science Economics Chapter 2 Sectors of The Indian Economy

Chapter 2 Sectors of The Indian Economy NCERT Notes

Chapter Name

Sectors of The Indian Economy Notes


CBSE Class 10

Textbook Name

Understanding Development Class 10

Related Readings

  • Notes for Class 10
  • Notes for Class 10 Economics
  • Revision Notes for Sectors of The Indian Economy 


People are engaged in many economic activities like manufacturing goods, services, etc., the best way to understand the economy is by grouping these activities into one using important criterion. These groups or components are called Sectors. Classifying the economy into various sectors allows us to understand the economy in depth.

Thus, a Sector is a major component of the economy in which businesses or markets share common products or services.

Classification of Sectors (Based on Activity)

There are three basic types of classification:

(i) Primary Sector (Agriculture and related sector)

  • It involves manufacturing goods by utilizing natural resources like crops, coal, dairy products, iron, etc.
  • Cultivation of cotton is mainly dependent on natural factors like rainfall, climate, and sunshine, so it is considered Primary sector activity.
  • It is called Primary as it forms the base to produce other secondary or tertiary sectors’ subsequent products.
  • As most natural products are obtained from agriculture, dairy, fishing, and forestry, this sector is also called the Agriculture and Related sector.

(ii) Secondary Sector (Industrial sector)

  • It involves transforming natural products into other forms using human-made interventions and manufacturing processes in the industry, workshop, or home.
  • g., manufacturing of cloth: cotton fibre from natural source plant is converted into cloth using spin yarn.
  • Since this sector is associated with various kinds of industries, it is also called as Industrial Sector.

(iii) Tertiary Sector (Service sector)

  • It involves the activities or services which aids the development of primary and secondary sectors. These activities directly do not produce goods, but they provide services that support the production process.
  • g., Transport, storage, communication, banking, trade, etc.
  • These activities generate services rather than goods; thus, the tertiary sector is also called the Service sector.
  • The service sector also includes essential services like teachers, doctors, washermen, barbers, administrative and accounting works. Also, IT services such as internet cafe, ATM booths etc.

All three Sectors are highly interdependent. One sector cannot function smoothly without the other.

Example: If a farmer refuses to sell their raw products, it would shut down the business of secondary sector and subsequently other service sector activities.

Comparing the three Sectors

It is a complex task to count the number of goods and services in all three sectors and know the total production. Instead of evaluating the actual numbers, the value of goods and services produced in each sector is used to compare. In this, the value of only final goods and services are considered as the value of intermediate products are already included in the finished goods.

Gross Domestic Product

  • The value of final goods and services produced in each sector during a particular year provides the sector’s total production for that year. The sum of the production in all three sectors is called Gross Domestic Product of a country.
  • It is the value of all final goods and services produced within a country during that particular year. GDP is directly proportional to how big the economy is.
  • In India, the central government has taken up the task of measuring GDP with all State and Union government’s help.

Historical Change in Sectors

During the initial phase of development Primary sector was regarded as the most important sector in the Indian economy. Over the years, a gradual shift has occurred, and the importance of sectors have changed. Presently the Service sector has emerged as the foremost sector in terms of total production.

Primary, Secondary and Tertiary Sectors in India

The graph shows that production has greatly elevated over the years in all three sectors. However, it has inflated the most in the tertiary sector, and it has replaced the primary sector as the largest producing sector in India.

Rising Importance of the Tertiary Sector in Production

The reasons that contribute towards making Tertiary or service sector as the most important are:

  • The importance of basic services such as hospitals, educational institutions, post and telegraph service, police stations, banks, insurance, transport, etc., has increased. These have become essential services for people, and in a developing country, a government must provide provisions for these services.
  • The necessity of the tertiary sector has increased with the growth in primary and secondary sector activities. Higher development in agriculture and industry has led to greater demand for services of the tertiary sector.
  • The income levels have led to a higher standard of living which has created demands for services like dining out, shopping, tourism, private schools etc.
  • Because of the present technological era, demands for new services based on information and technology have also increased.

This all has led to the expansion in the service sector.

Where are most of the people employed?

Over the time of forty years, there has been a drastic change in the share of three sectors in GDP, but the same is not observed when the percentage share of employment in each sector is compared.

  • The primary sector is the largest employer. Even though industrial output or the production of goods rocketed eight times during the period, employment in the industry went up by only 3 times.
  • In the tertiary sector where the production inflated by 14 times, employment in the service sector rose only five times.
  • As a result, more than half of the country’s workers are working in the primary sector, mainly in agriculture, producing only a quarter of the GDP. This means that there are many workers than required in the primary sector leading to underemployment.


  • Under-employment is the under-utilization of a person’s skill. It is the situation where people are made to work less than their potential in a relatively low-skill and low wage job.
  • It is not same as unemployment. Underemployment is hidden in contrast to unemployment which is clearly visible. Hence, it is also called as disguised unemployment.
  • Here, there are too many workers available than necessary for a job. Thus, the labour force works redundantly with minimal to no productivity. Even if a few workers discontinue to work, it will not affect the total economic output.

e.g. In rural areas, this kind of unemployment is more prevalent. If a piece of land requires only three people to work on it and instead five people are working on it, then the two extra labourers are said to be in a situation of disguised unemployment.

A major portion of the people is underemployed in a rural area where the primary income source is through agriculture. The government can take measures to build a dam and canals to irrigate their farms; this will allow the farmers to grow alternate crops and increase their production and employment opportunities.

The government or banks can provide money or loans to farmers at a reasonable rate of interest which will help them to construct wells or buy fertilizers, seeds, equipment, pump-sets, etc. to improve their farming, in turn, increasing the agricultural output.

The government should invest money in transportation and storage of crops, constructing better roads in rural areas that will enable the farmers to sell their crops throughout the year. This can generate employment is not just the primary sector, but people from the service and industrial sectors can benefit.

Another way is to identify, promote and locate industries and services in semi-rural areas where many people may be employed. For example, setting up a dal mill, opening cold storage, promoting the honey collection, setting up industries that process vegetables etc.

More employment opportunities can be created in urban areas by the construction of more buildings, educational institutes, hospitals, etc. This will increase the requirement of more teachers, healthcare workers, nurses, doctors, etc.

Tourism, Regional craft industry, Information technology and other new services are also potential areas for increasing employment.

Right to Work (MGNREGA, 2005)

There is a potential for increasing the income and employment in every state or region in India through services such as tourism, craft, small scale industries, shops, etc., but its implementation requires a long time.

As a short-term measure, the Central Government in India made a law implementing the Right to Work in about 625 districts of India. It is called the Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA 2005).

Main objectives of the MGNREGA 2005

  • To guarantee 100 days of employment in a year to all those who can and need work in rural areas. In case the Government fails, it offers unemployment allowance.
  • To give preference to the type of work that will help increase the production from the land.

Divisions of Sector as Organized and Unorganized

Organized Sector

Unorganized Sector

Organized Sector covers those enterprises where the terms of employment are regular.

Unorganized Sector covers small, scattered units where the terms of employment are not regular.

The government regulates this sector.

This sector is outside the control of the government.

It is governed by rules and regulations given in various laws such as the Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops and Establishments Act etc.

Any act does not govern this sector.

The workers in this sector have job security.

Workers have no job security.

The workers benefit from employers like paid leave, PF, gratuity, medical benefits, etc.

There is no provision for overtime, paid holidays or leave due to sickness, etc.

The factory manager must ensure facilities like drinking water and a safe working environment

People can be asked to leave without any reason.

E.g., Banks, Hospitals, schools, etc.

E.g., Casual workers, People selling on the street, construction labourers etc.

Majority of the workers seek organized sector jobs. Still, these workers are forced to enter the unorganized sector job areas because of very fewer opportunities, where they are exploited and paid low wages.

In rural areas, the unorganized sector comprises landless agricultural labourers, small and marginal farmers, sharecroppers and artisans. These labourers should be supported by facilitating essential provisions like delivery of seeds, agricultural inputs, credit, storage and marketing outlets.

In urban areas, the workers in the small-scale industry, casual workers in construction, trade and transport etc., and those who work as street vendors, head load workers, garment makers, rag pickers etc. work in the unorganized sector. The government should make provisions for procuring raw material and marketing of their products.

Protection and support to the unorganized sector workers are necessary for both economic and social development.

Public Sector and Private Sector

This classification of economic activities into sectors is based on the ownership of assets and responsibility for delivery of services.

Public Sector

Private Sector

The government owns most of the assets and provides all the services.

e.g. Railways, Post office, military, law etc.

The ownership of assets and delivery of services is in the hands of private individuals or companies.


The main motive of services is the welfare of people.

The main motive of private sector activities is to earn profits.

The government raise money through taxes and other means.

To get services of the private sector, an individual must pay money to companies.

  • There are several services such as the construction of roads, bridges, railways, harbours, electricity, etc., which the private sector cannot afford to provide at a reasonable cost. Thus, the government undertakes such heavy spending and ensures the provision of these facilities for the public.
  • In certain cases, the government must support services like selling electricity at low cost to small-scale industries; otherwise, they could shut down. Thus, the government bears the cost and encourages the development of small-scale industries.
  • The government supports farmers and consumers by buying crops at a fair price. This way, it ensures the supply of essential commodities.
  • It is the responsibility of the government to provide basic facilities like health and education.
  • It is also the duty of the government to take care of the poorest and most ignored regions of the country through increased spending in such areas.
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