Sectors of Indian Economy

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From an economic perspective, there are three major sector of Indian economy – the primary sector, the tertiary sector, and the secondary sector. However, it can also be divided into the private and public sector on the basis of ownership and organized and unorganized with regards to ways of operation.

Major Sector of Indian Economy

Primary Sector

Overview:The primary sector of Indian economy depends directly on natural resources to execute the various processes and manufacture the goods and services needed to keep the whole operation going.

Examples of primary sector:In India, agriculture is the biggest example of the primary sector. However, forestry and fishing can also be cited as other examples of this particular sector.

Problems: Experts opine that under employment and disguised unemployment are the major problems being experienced by the primary sector. In the first case the workers are not working to the best of their abilities and in the second case workers are there but they are not able to fulfill their true potential. The production process carries on even if people are relieved of their duties.

Solutions: Experts feel that in this scenario the government, both the national and the states, can increase the funds being spent for improvement of irrigation facilities and also provide loans for purchasing high quality fertilizers and seeds. The storage and transport facilities can also be bettered – the local banks can also play a critical role in this regard by providing loans with more convenient rates.

The governments also need to determine and then foster services and industries in the semi urban and rural areas. This can increase employment. Greater health and educational benefits can also be made available so as to generate more jobs. Promotion of heritage tourism is another way to help this sector.

Government assistance: The Indian government has, however, taken some constructive steps to address these problems. It has started the National Rural Employment Guarantee Act 2005 whereby people capable of working are assured a minimum of 100 days of employment. It also provides unemployment allowance to people if they are not employed in the stated period.

Global standing:In terms of agricultural production India occupies the second spot in the world.

Economic contribution: Agriculture and related sectors such as forestry, logging, and fishing contribute almost 15.7 percent of the national GDP

Employment generation: The primary sector provides work opportunities for approximately 52.1 percent of the available workforce. In spite of its recent decline this sector still remains one of the major constituents of the national economy. A report by the Planning Commission, however, states that employment may go down thanks to better productivity.

Secondary Sector

Overview: In the secondary sector of the national economy, natural ingredients are used to create products and services that are consequently used for consumption. This sector can be regarded as one that adds value to the products and services on offer.

Examples:The major examples of this sector are manufacturing and transporting.

Employment generation:The various industries in India employ almost 14 percent of the aggregate workforce in the country.

Economic contribution:The secondary sector of Indian economy contributes almost 28 percent of the GDP.

Global standing: India occupies the 12th spot in the world when it comes to nominal factory production in real terms.

Tertiary Sector

Overview: Indian economy’s tertiary sector is also referred to as service sector that plays an important role in development of the other two sectors. Like the secondary sector it also provides value addition for a product.

Global standing:With regards to output in the services sector, India occupies the 13th spot in the world.

Employment generation:It employs approximately 23 percent of the Indian workforce

Yearly growth rate:The tertiary economic sector of India has a yearly growth rate of almost 7.5 percent.

Economic contribution: This sector accounts for almost 55 percent of India’s GDP.

Private and Public sector in India

Overview: The main difference between the private and public sectors of Indian economy is that in the later a group of individuals or an individual holds the rights to the properties whereas in the second instance the government is the owner.

Operational goals: With a publicly held company the main aim behind operations is social welfare while for the private sector profits are the main drivers.

Examples: Railways and post offices are the major examples of the public sector entities while companies like Tata, Ambani, and Birla groups are the most prominent entities from the private sector in India.

Growth predictions: As per a report by the Indian Planning Commission, the private sector in India can generate 2500 business opportunities in the coming decade. It has been estimated that at least 10 thousand start ups will have to be created for this to be a reality. It is also expected that these companies can together earn revenues to the tune of 200 billion dollars. However, the forecast in the public sector is that the job growth rate will be rather slow in the years ahead.

Challenges:Both the sectors are required to create 10 to 15 million jobs so that the next generation can be provided meaningful employment. For this it is important to foster an environment of business and entrepreneurship. Since entrepreneurship is mostly driven by innovation it will use lesser natural resources and help India deal better with the following:
  • Top class education
  • Waste management
  • Reasonably priced healthcare
  • Financial inclusion
  • Management of clean energy resources

Employment generation:The Planning Commission Report also says that the big companies in both public and private sectors have not been able to create sufficient jobs and it is not likely that they will do so in the next 10 or 20 years. These companies are also supposed to experience slow growth in the next few years. Jobs in the private sector have not increased in the last few years thanks to the addition of the following factors and more:
  • automation
  • profits
  • digitization

In the last 20 years the banking sector has increased its assets and revenues by many folds but not the jobs.

Indian Economy Organized and Unorganized sector

Overview:Indian economy can also be classified into the organized and unorganized sector. In the first one the employment related conditions are fairly regular while in case of the latter the government has no control. The organized sector is registered with the government, which is not the case with the unorganized one. The first one adheres to the stipulations and rules laid down by the government while the second one provides irregular and lower levels of payment.

Employment conditions:The organized sector offers some amount of job security and also has definite working hours while in the unorganized sector there is zero job security and time depends on the owner’s whims. The workers in the first one are liable to be provided leaves, overtime payment, and medical benefits, which are not there in the second one. The work atmosphere in the organized sector is mostly safe and there are basic amenities like water. However, it is primarily the opposite in the unorganized sector.

Need for government assistance:Experts opine that in the unorganized sector in the rural areas the government can assist the farmers by the proper and timely provision of the following:
  • seeds
  • storage facilities
  • agricultural inputs
  • markets
  • credit

In the urban areas following are the major domains where the governments can pitch in vis-à-vis the unorganized sector:
  • provision of raw material
  • avoidance of any economic and social prejudices towards workers
  • provision of marketing output

Employment generation:In India there are approximately 487 million workers, a number preceded only by China. 94 percent of this workforce is employed in the companies that belong to the unorganized sector and this includes gems and diamond polishing entities to pushcart sellers.

The organized sector is mostly made of workers that are employed in the public sector companies. Of late the scales are slowly tipping in the favor of the private sector with a lot of Indians starting their businesses and international entities coming into the country.

Economic contribution: The number of jobs may have gone down in the organized sector in the recent years. However, National Sample Survey, and Central Statistics Office data show that the average salaries have gone up in the same time. The sector has also become better from the point of view of productivity.

Important components of Indian economy

Textile:The textile sector is preceded only by agriculture when it comes to provision of jobs in India and contributes approximately 20 percent of the total production in the south Asian country’s manufacturing sector. At least 200 million people are employed in this sector.

Retail: The retail sector is regarded as one of the mainstays of the national economy and one of the major reasons for that is its contribution of approximately 14 to 15 percent to the national GDP. The entire market’s worth has been estimated to be at 450 billion dollars – it is one of the leading markets on a global basis when it comes to economic worth. It also has almost 1.2 billion customers and is experiencing quick growth in that regard.

Tourism: This particular sector is not as developed as others in comparison but it has been growing fairly well. It creates 8.78% of the total jobs in India in addition to contributing near about 6.23% of the aggregate GDP. Most of the tourists to India are from the UK and the US.

In addition to the above mentioned ones, mining, energy and power, and banking and finance are regarded as important parts of the Indian economy.

Last Updated on 01/25/2013