CBSE Class 10 Economics Chapter 2 ‘Sectors of the Indian Economy’ Notes

Welcome to our online tutorial classes, where learning meets innovation! In this segment, we delve into the fascinating world of Economics with our meticulously crafted CBSE Class 10 Economics Chapter 2 notes on ‘Sectors of the Indian Economy’. Through these notes, we aspire to spark your curiosity, enhance your comprehension, and equip you with knowledge that extends beyond the confines of the classroom.

Chapter 2 of CBSE Class 10 Economics, titled “Sectors of the Indian Economy,” explains the classification of economic activities into primary, secondary, and tertiary sectors. It explores their GDP contributions, employment patterns, and the shift in dominance over time. The chapter also distinguishes between organised and unorganized, public and private sectors.

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CBSE Class 10 Economics Chapter 2 ‘Sectors of the Indian Economy’ Overview

CBSE Class 10 Economics Chapter 2, titled “Sectors of the Indian Economy,” explores the classification of economic activities into primary, secondary, and tertiary sectors. It delves into the significance of these sectors, their contributions to GDP, and employment patterns. The chapter highlights the shift in sectoral dominance over time, emphasizing the rising importance of the tertiary sector. It also differentiates between organised and unorganised sectors, as well as public and private sectors, discussing their characteristics and challenges. Additionally, the chapter addresses underemployment and suggests measures to increase employment opportunities, thereby providing a comprehensive understanding of the economic structure in India.

With our expertly curated notes, you’ll be well-equipped to ace your CBSE Class 10 Economics exams and embark on a lifelong journey of discovery and learning.

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CBSE class 10 Economics Chapter 2 ‘Sectors of the Indian Economy’ Notes

Sectors of Economic Activities

Primary Sector:

• When we produce goods by exploiting natural resources, it is an activity of the primary sector.
• This is because it forms the base for all other products that we subsequently make.
• Since most of the natural products we get are from agriculture, dairy, fishing, forestry, this sector is also called agriculture and related sector.
• For example, the cultivation of cotton. It takes place within a crop season. For the growth of the cotton plant, we depend mainly, but not entirely, on natural factors like rainfall, sunshine and climate. The product of this activity, cotton, is a natural product.
• Similarly, in the case of an activity like dairy, we are dependent on the biological process of the animals and availability of fodder etc. The product here, milk, also is a natural product.
• Similarly, minerals and ores are also natural products.

Secondary Sector:

• The secondary sector covers activities in which natural products are changed into other forms through ways of manufacturing that we associate with industrial activity.
• The product is not produced by nature but has to be made and therefore some process of manufacturing is essential.
• This could be in a factory, a workshop or at home.
• For example, using cotton fibre from the plant, spin yarn and weave cloth.
• Using sugarcane as a raw material, we make sugar or gur.
• We convert earth into bricks and use bricks to make houses and buildings.
• Since this sector gradually became associated with the different kinds of industries that came up, it is also called as industrial sector.

Tertiary Sector:

• These are 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 a support for the production process.
• For example, goods that are produced in the primary or secondary sector would need to be transported by trucks or trains and then sold in wholesale and retail shops.
• At times, it may be necessary to store these in godowns.
• We also may need to talk to others over telephone or send letters (communication) or borrow money from banks (banking) to help production and trade.
• Transport, storage, communication, banking, trade are some examples of tertiary activities.
• Since these activities generate services rather than goods, the tertiary sector is also called the service sector.
• Service sector also includes some essential services that may not directly help in the production of goods. For example, we require teachers, doctors, and those who provide personal services such as washermen, barbers, cobblers, lawyers, and people to do administrative and accounting works.
• In recent times, certain new services based on information technology such as internet cafe, ATM booths, call centres, software companies etc have become important.

Examples of Economic Activities

Example	What Does This Show?
Imagine what would happen if farmers refuse to sell sugarcane to a particular sugar mill. The mill will have to shut down.	This is an example of the secondary or industrial sector being dependent on the primary sector.
Imagine what would happen to cotton cultivation if companies decide not to buy from the Indian market and import all cotton they need from other countries.	This shows that the primary sector (cotton farmers) is dependent on the secondary sector (textile industry).
Farmers buy many goods such as tractors, pumpsets, electricity, pesticides, and fertilisers. Imagine what would happen if the price of fertilisers or pumpsets goes up. Cost of cultivation will rise and their profits will be reduced.	This shows how the primary sector depends on the secondary sector (manufacturers of farming equipment and inputs).
People working in industrial and service sectors need food. Imagine what would happen if there is a strike by transporters and lorries refuse to take vegetables, milk, etc., from rural areas. Food will become scarce in urban areas whereas farmers will be unable to sell their products.	This is an example of the tertiary sector (transport) supporting both the primary sector (farmers) and secondary sector (industries).

Comparing the Three Sectors

Primary, Secondary, and Tertiary Sectors:

• The various production activities in the primary, secondary and tertiary sectors produce a very large number of goods and services.
• Also, the three sectors have a large number of people working in them to produce these goods and services.

Measurement of Production:

• In an economy there could be one or more sectors which are dominant in terms of total production and employment, while other sectors are relatively small in size.
• Values of goods and services should be used rather than adding up the actual numbers.
• For example, if 10,000 kgs of wheat is sold at Rs 20 per kg, the value of wheat will be Rs 2,00,000. The value of 5000 coconuts at Rs 15 per coconut will be Rs 75,000.
• Similarly, the value of goods and services in the three sectors are calculated and then added up.
• Not every good (or service) that is produced and sold needs to be counted. Only the final goods and services are included.
• Take, for instance, a farmer who sells wheat to a flour mill for Rs 20 per kg.
• The mill grinds the wheat and sells the flour to a biscuit company for Rs 25 per kg.
• The biscuit company uses the flour and things such as sugar and oil to make four packets of biscuits.
• It sells biscuits in the market to the consumers for Rs 80 (Rs 20 per packet). Biscuits are the final goods, i.e., goods that reach the consumers.
• In contrast to final goods, goods such as wheat and the wheat flour are intermediate goods.
• Intermediate goods are used up in producing final goods and services.
• The value of final goods already includes the value of all the intermediate goods that are used in making the final good. Hence, the value of Rs 80 for the biscuits (final good) already includes the value of flour (Rs 25).
• Similarly, the value of all other intermediate goods would have been included. To count the value of the flour and wheat separately is therefore not correct because then we would be counting the value of the same things a number of times. First as wheat, then as flour and finally as biscuits.

Gross Domestic Product (GDP):

• The value of final goods and services produced in each sector during a particular year provides the total production of the sector for that year.
• The sum of production in the three sectors gives what is called the Gross Domestic Product (GDP) of a country.
• It is the value of all final goods and services produced within a country during a particular year.
• GDP shows how big the economy is.
• In India, the mammoth task of measuring GDP is undertaken by a central government ministry.
• This Ministry, with the help of various government departments of all the Indian states and union territories, collects information relating to total volume of goods and services and their prices and then estimates the GDP.

Historical Change in Sectors:

Initial Stages:

• It has been noted from the histories of many, now developed, countries that at initial stages of development, primary sector was the most important sector of economic activity.

Development Over Time:

• As the methods of farming changed and agriculture sector began to prosper, it produced much more food than before.
• Many people could now take up other activities.
• There were increasing number of craft persons and traders. Buying and selling activities increased many times.
• Besides, there were also transporters, administrators, army etc.
• However, at this stage, most of the goods produced were natural products from the primary sector and most people were also employed in this sector.

Shift to Secondary Sector:

• Over a long time (more than hundred years), and especially because new methods of manufacturing were introduced, factories came up and started expanding.
• Those people who had earlier worked on farms now began to work in factories in large numbers.
• People began to use many more goods that were produced in factories at cheap rates.
• Secondary sector gradually became the most important in total production and employment.
• Hence, over time, a shift had taken place. This means that the importance of the sectors had changed.

Primary, Secondary and Tertiary Sectors in India

Reasons for Importance of the Tertiary Sector:

1. Basic Services:

• Hospitals, educational institutions, post and telegraph services, police stations, courts, village administrative offices, municipal corporations, defence, transport, banks, insurance companies, etc.
• Government plays a significant role in providing these services.

2. Development of Agriculture and Industry:

• Growth in agriculture and industry increases demand for services like transport, trade, and storage.
• The development of agriculture and industry leads to the development of services such as transport, trade, storage and the like.
• Greater the development of the primary and secondary sectors, more would be the demand for such services.

3, Rising Income Levels:

• As income levels rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, professional training etc.
• This change is quite sharply visible especially in big cities.

4. Emergence of New Services:

• Over the past decade or so, certain new services such as those based on information and communication technology have become important and essential.
• The production of these services has been rising rapidly.

Unequal Growth in the Service Sector:

• Not all of the service sector is growing equally well.
• Some parts of the service sector (highly skilled jobs) are growing rapidly.
• Other parts (e.g., small shopkeepers, repair workers) provide low-income employment opportunities with limited growth potential.
• These people barely manage to earn a living and yet they perform these services because no alternative opportunities for work are available to them.
• Hence, only a part of this sector is growing in importance.

Where are most of the people employed?

Employment in Sectors

• Graph 2: Shows changing importance of sectors in GDP over forty years.
• Graph 3: Shows share of employment in three sectors (1977-78 and 2017-18).
  • Primary sector remains the largest employer.

Disparity in Sectoral Productivity

• GDP Share (1973-74 to 2013-14):
  • Significant shift in GDP contribution from primary to tertiary and secondary sectors.
• Employment Share (1977-78 to 2017-18):
  • Primary sector remains the largest employer despite its reduced share in GDP.
  • Secondary and tertiary sectors, though contributing more to GDP, have not created enough jobs to absorb the workforce from agriculture.

Sectoral Share in GDP vs. Employment

• Primary sector employs over 50% of workers but contributes only about one-sixth of GDP.
• Secondary and tertiary sectors employ fewer people but generate the majority of GDP.
• While there has been a change in the share of the three sectors in GDP, a similar shift has not taken place in employment.
• The primary sector continues to be the largest employer even now.
• Not enough jobs were created in the secondary and tertiary sectors.

Disparity in Sectoral Productivity

• Primary sector employs over 50% of workers but contributes only about one-sixth of GDP.
• Secondary and tertiary sectors employ fewer people but generate the majority of GDP.

Employment Shift:

• Industrial output increased over nine times, but employment in industry only increased around three times.
• Production in service sector rose 14 times, but employment only rose five times.
• More than half of the workers are in the primary sector, producing only about one-sixth of the GDP.
• Secondary and tertiary sectors produce the rest, employing less than half the people

Underemployment and Disguised Unemployment

Definition: People appear employed but are not working to their full potential. Production remains unaffected even if some workers are removed.

Underemployment in Agriculture:

• There are more people in agriculture than is necessary.
• So, even if a few people are moved out, production will not be affected. In other words, workers in the agricultural sector are underemployed.

Examples:

• A small farmer, Laxmi, owning about two hectares of unirrigated land dependent only on rain and growing crops, like jowar and arhar.
• All five members of her family work in the plot throughout the year because they have nowhere else to go for work.
• Everyone is working, none remains idle, but in actual fact, their labour effort gets divided.
• Each one is doing some work but no one is fully employed.
• This is the situation of underemployment, where people are apparently working but all of them are made to work less than their potential.
• This kind of underemployment is hidden in contrast to someone who does not have a job and is clearly visible as unemployed.
• Hence, it is also called disguised unemployment.

Alternative Employment:

• Hiring by landlords or factory work can increase family income without affecting production on their own farm.
• Many farmers like Laxmi could be provided with proper work elsewhere without affecting agricultural production.
• Once again the earnings of the family would increase and they would also continue to produce as much from their land.
• There are lakhs of farmers like Laxmi in India. This means that even if we remove a lot of people from agricultural sector and provide them with proper work elsewhere, agricultural production will not suffer.
• The incomes of the people who take up other work would increase the total family income.

Urban Service Sector:

• This underemployment can also happen in other sectors.
• There are thousands of casual workers (e.g., painters, plumbers) in the service sector in urban areas who search for daily employment.
• Street vendors and cart pushers work long hours but earn minimal income.
• They engage in such activities due to a lack of better employment opportunities.

• GDP Share (1973-74 to 2013-14):
  • Significant shift in GDP contribution from primary to tertiary and secondary sectors.
• Employment Share (1977-78 to 2017-18):
  • Primary sector remains the largest employer despite its reduced share in GDP.
  • Secondary and tertiary sectors, though contributing more to GDP, have not created enough jobs to absorb the workforce from agriculture.

Disparity in Sectoral Productivity

• Primary sector employs over 50% of workers but contributes only about one-sixth of GDP.
• Secondary and tertiary sectors employ fewer people but generate the majority of GDP.

How to Create More Employment?

Underemployment in Agriculture:

• There continues to be considerable underemployment in agriculture.
• There are also people who are not employed at all.

Employment Generation in Agriculture:

1. Agricultural Inputs and Credit:

• Access to seeds, fertilizers, agricultural equipment, and pumpsets.
• Poor farmers need affordable loans to purchase these inputs.
• Local banks providing credit at reasonable rates to improve farming

2. Irrigation Projects:

• Investment in wells, canals, and dams can enhance agricultural productivity.
• The government can spend some money or banks can provide a loan, to construct a well for her family to irrigate the land.
• Farmers will then be able to irrigate their land and take a second crop, wheat, during the rabi season and generate more employment for the family members.
• Large-scale irrigation projects can create significant employment within agriculture.

3. Transportation and Storage:

• Increased production requires transporting products to nearby towns.
• Government investment in transportation and storage facilities.
• Improved rural roads and mini-trucks for better access.
• Productive employment for farmers, transport, and trade services.

4. Agricultural Inputs and Credit:

• Access to seeds, fertilizers, agricultural equipment, and pumpsets.
• Poor farmers need affordable loans to purchase these inputs.
• Local banks providing credit at reasonable rates to improve farming

5. Industry and Services in Semi-Rural Areas:

• Identify, promote and locate industries and services in semi-rural areas where a large number of people may be employed.
• For instance, suppose many farmers decide to grow arhar and chickpea (pulse crops). Setting up a dal mill to procure and process these and sell in the cities is one such example.
• Opening a cold storage could give an opportunity for farmers to store their products like potatoes and onions and sell them when the price is good.
• In villages near forest areas, we can start honey collection centres where farmers can come and sell wild honey.
• It is also possible to set up industries that process vegetables and agricultural produce like potato, sweet potato, rice, wheat, tomato, fruits, which can be sold in outside markets.
• This will provide employment in industries located in semi-rural areas and not necessarily in large urban centres.

6. Education and Healthcare:

• In India about 60 per cent of the population belongs to the age group 5-29 years?
• Out of this, only about 51 per cent are attending educational institutions.
• The rest and particularly those aged less than 18 years may be at home or many of them may be working as child labourers.
• If these children are to attend schools, we will require more buildings, more teachers and other staff.
• A study conducted by the erstwhile Planning Commission (now known as NITI Aayog) estimates that nearly 20 lakh jobs can be created in the education sector alone.
• Similarly, if we are to improve the health situation, we need many more doctors, nurses, health workers etc. to work in rural areas.

7. Tourism and Regional Development:

• Every state or region has potential for increasing the income and employment for people in that area.
• It could be tourism, or regional craft industry, or new services like IT. Some of these would require proper planning and support from the government.
• For example, the same study by the Planning Commission says that if tourism as a sector is improved, every year we can give additional employment to more than 35 lakh people.

8. Short-term Measures:

• We must realise that some of the suggestions discussed above would take a long time to implement.
• For the short-term, we need some quick measures.
• Recognising this, the central government in India made a law implementing the Right to Work in about 625 districts of India.
• It is called Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA 2005).
• Under MGNREGA 2005, all those who are able to, and are in need of, work in rural areas are guaranteed 100 days of employment in a year by the government.
• If the government fails in its duty to provide employment, it will give unemployment allowances to the people.
• The types of work that would in future help to increase the production from land will be given preference under the Act.

Division of Sectors as Organised and Unorganised

Organised Sector

• Organised sector covers those enterprises or places of work where the terms of employment are regular and therefore, people have assured work.
• They are registered by the government and have to follow its rules and regulations which are given in various laws such as the Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops and Establishments Act etc.
• It is called organised because it has some formal processes and procedures.
• Some of these people may not be employed by anyone but may work on their own but they too have to register themselves with the government and follow the rules and regulations.

Key Characteristics:

• Formal Processes and Procedures:
  • Workplaces operate under legal frameworks such as:
    • Factories Act
    • Minimum Wages Act
    • Payment of Gratuity Act
    • Shops and Establishments Act
• Fixed Working Hours:
  • Employees work a set number of hours.
  • Overtime is paid if they work beyond the regular hours.
• Job Security and Benefits:
  • Workers enjoy security of employment.
  • Benefits include:
    • Paid leave and holidays
    • Provident fund and gratuity
    • Medical benefits
    • Pension after retirement
• Safe Working Conditions:
  • Employers must ensure access to basic amenities (e.g., drinking water, clean environment).

2. Unorganised Sector

Definition: The unorganised sector is characterised by small and scattered units which are largely outside the control of the government.

Key Characteristics:

• Lack of Formality:
  • Rules and regulations exist but are rarely followed
• Insecure and Irregular Jobs:
  • Jobs are low-paid, with no assurance of regular income.
  • Workers can be dismissed at any time without proper justification.
• Absence of Employee Benefits:
  • No provision for:
    • Overtime pay
    • Paid leave or holidays
    • Sick leave or medical benefits
• Seasonal Employment:
  • Employment may fluctuate depending on the season or workload.
• Dependence on Employer’s Whims:
  • Workers often face arbitrary decisions regarding employment terms.
• Examples:
  • Kamal, a daily wage laborer in a grocery shop, works long hours without paid leave or job security.
  • Street vendors, repair workers, and small-scale farmers fall under this sector.

Comparison of Organised and Unorganised Sectors

Aspect	Organised Sector	Unorganised Sector
Employment Terms	Regular and formal	Irregular and informal
Job Security	High	Low
Benefits	Provident fund, gratuity, paid leave, pension	No benefits
Working Hours	Fixed, with overtime pay	Long and undefined
Government Regulations	Strict adherence to labor laws	Limited or no adherence
Examples	Office workers, factory employees	Daily wage laborers, street vendors, small farmers

How to Protect Workers in the Unorganised Sector?

Challenges in Employment:

• The organised sector offers jobs that are the most sought-after. But the employment opportunities in the organised sector have been expanding very slowly.
• Many organised sector enterprises operate in the unorganised sector to evade taxes and labor laws.
• Large number of workers are forced to enter the unorganised sector jobs, which pay a very low salary.
• They are often exploited and not paid a fair wage.
• Their earnings are low and not regular. These jobs are not secure and have no other benefits.
• Increase in job losses in the organised sector since the 1990s, pushing workers to the unorganised sector with low earnings.
• Hence, besides the need for more work, there is also a need for protection and support of the workers in the unorganised sector.

Need for Protection and Support:

Vulnerable Workers in Rural Areas:

• In the rural areas, the unorganised sector mostly comprises of landless agricultural labourers, small and marginal farmers, sharecroppers and artisans (such as weavers, blacksmiths, carpenters and goldsmiths).
• Nearly 80 per cent of rural households in India are in small and marginal farmer category.
• These farmers need to be supported through adequate facility for timely delivery of seeds, agricultural inputs, credit, storage facilities and marketing outlets.

Vulnerable Workers in Urban Areas:

• In the urban areas, unorganised sector comprises mainly of workers in 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.
• Small-scale industry also needs government’s support for procuring raw material and marketing of output. The casual workers in both rural and urban areas need to be protected.

Scheduled Castes, Tribes, and Backward Communities:

• Majority of workers from scheduled castes, tribes and backward communities find themselves in the unorganised sector.
• Besides getting the irregular and low paid work, these workers also face social discrimination.
• Protection and support to the unorganised sector workers is thus necessary for both economic and social development.

Key Measures for Protection and Support:

• Ensure fair wages and regular earnings.
• Provide job security and other benefits.
• Government initiatives to support small-scale industries and self-employed individuals.
• Improve access to credit, raw materials, and markets.
• Address social discrimination and provide equal opportunities.

Sectors in Terms of Ownership: Public and Private Sectors

Basis of Classification:

• Classifying economic activities into sectors could be on the basis of who owns assets and is responsible for the delivery of services.

Public Sector:

• Ownership and Services: In the public sector, the government owns most of the assets
• Examples: Railways, Post Office.
• Purpose: The purpose of the public sector is not just to earn profits.
• Funding: Governments raise money through taxes and other means to cover service expenses.
• Activities:
  • Construction of roads, bridges, railways, harbours.
  • Generating electricity, providing irrigation through dams.
  • Providing essential services that the private sector would not provide at a reasonable cost due to high expenditure or difficulty in collecting money from users.

Private Sector:

• Ownership and Services: In the private sector, ownership of assets and delivery of services is in the hands of private individuals or companies.
• Examples: Tata Iron and Steel Company Limited (TISCO), Reliance Industries Limited (RIL).
• Purpose: Activities in the private sector are guided by the motive to earn profits.
• Payment: To get such services we have to pay money to these individuals and companies.

Government Expenditure and Support:

1. Provision of Public Goods:

• There are several things needed by the society as a whole but which the private sector will not provide at a reasonable cost.
• Some of these need spending large sums of money, which is beyond the capacity of the private sector.
• Also, collecting money from thousands of people who use these facilities is not easy. Even if they do provide these things they would charge a high rate for their use.
• Examples: Examples are construction of roads, bridges, railways, harbours, generating electricity, providing irrigation through dams etc.
• Thus, governments have to undertake such heavy spending and ensure that these facilities are available for everyone.

2. High Cost of Infrastructure:

• There are some activities, which the government has to support. The private sector may not continue their production or business unless government encourages it.
• For example, selling electricity at the cost of generation may push up the costs of production of goods in many industries.
• Many units, especially small-scale units, might have to shut down.
• Government here steps in by producing and supplying electricity at rates which these industries can afford. Government has to bear part of the cost.
• Similarly, the Government in India buys wheat and rice from farmers at a ‘fair price’. This it stores in its godowns and sells at a lower price to consumers through ration shops.
• The government has to bear some of the cost. In this way, the government supports both farmers and consumers.

3. Support to Private Sector:

• There are a large number of activities which are the primary responsibility of the government. The government must spend on these.
• Providing health and education facilities for all is one example.
• Running proper schools and providing quality education, particularly elementary education, is the duty of the government
• Private sector may avoid investing in large-scale infrastructure due to high costs and difficulty in collecting user fees.
• Government ensures such essential services are accessible to all at reasonable rates.

Government’s Role in Social Welfare

1. Health and Education:

• India’s size of illiterate population is one of the largest in the world.
• Nearly half of India’s children are malnourished and a quarter of them are critically ill.
• The infant mortality rate of Odisha (40) or Madhya Pradesh (48) is higher than some of the poorest regions of the world
• It is the primary responsibility of the government to ensures access to quality healthcare and education for all, particularly in rural and underprivileged areas.

2. Food Security:

• Government buys crops (like wheat and rice) from farmers at a fair price and sells them at subsidized rates through ration shops.
• Supports both farmers and low-income consumers.

3. Human Development:

• Focus on improving key indicators like infant mortality, malnourishment, and access to clean drinking water.
• Government addresses:
  • Infant Mortality Rates (IMR) in states like Odisha (40) and Madhya Pradesh (48).
  • Housing and nutrition for the poor.

4. Focus on Underdeveloped Regions:

• Special attention to the poorest and most neglected areas.
• Increased government spending on basic amenities and human development.
• Government also needs to pay attention to aspects of human development such as availability of safe drinking water, housing facilities for the poor and food and nutrition.
• 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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