🟠 Topic 6: Sectors of the Economy – Primary, Secondary, Tertiary

📌 Introduction

The economic structure of a country can be understood by classifying its economy into three broad sectors — Primary, Secondary, and Tertiary. This classification helps understand how economic activities evolve as a country progresses from a traditional economy to a modern industrial and service-based economy.

🔹 Primary Sector – The Extractive Sector 🌾

🏞️ Definition

The Primary Sector involves extraction and harvesting of natural resources. It includes activities directly dependent on natural resources.

🔎 Examples

• Agriculture 🚜
• Fishing 🎣
• Forestry 🌳
• Mining ⛏️

📊 Importance

• Historically, this sector was the largest contributor to GDP.
• In developing countries like India, it still employs a large proportion of the population.
• However, its share in GDP decreases as economies develop.

🔹 Secondary Sector – The Manufacturing Sector 🏭

🏗️ Definition

The Secondary Sector involves processing and manufacturing activities where raw materials from the primary sector are converted into finished products.

🔎 Examples

• Construction 🏗️
• Automobile manufacturing 🚗
• Textile production 👕
• Food processing 🍞

📊 Importance

• Contributes to industrialization and economic diversification.
• Generates higher incomes compared to the primary sector.
• Essential for export growth in developing nations.

🔹 Tertiary Sector – The Service Sector 📊

💼 Definition

The Tertiary Sector provides services rather than goods. It includes services that support both primary and secondary sector activities, as well as direct consumer services.

🔎 Examples

• Banking and finance 💰
• Healthcare 🏥
• Education 🎓
• Retail and hospitality 🏨

📊 Importance

• In developed economies, this is the largest sector.
• In India, the service sector contributes around 54% to GDP.
• Services drive technological innovation and knowledge economy growth.

🔹 Comparison of Sectors – Key Differences

🔥 Evolution Across Economic Development

📈 In developing nations:

• Primary sector employs majority population but contributes less to GDP.
• Secondary sector expands with industrialization.
• Tertiary sector grows rapidly with urbanization, income growth, and globalization.

📈 In developed nations:

• Tertiary sector becomes the dominant sector, with high-value services driving the economy.
• Primary sector becomes highly mechanized, employing very few people.

🔹 India’s Sectoral Composition – Key Trends 🇮🇳

• Primary Sector – Contributes ~18% to GDP, but employs ~43% of the population (reflecting low productivity).
• Secondary Sector – Contributes around ~25% to GDP.
• Tertiary Sector – Contributes ~54% to GDP and is the fastest-growing.

🔹 Role of Government Policies

1️⃣ Primary Sector

• PM Kisan, Soil Health Card, Fasal Bima Yojana to support agriculture.
• Focus on organic farming and sustainable agriculture.

2️⃣ Secondary Sector

• Make in India, PLI schemes to promote manufacturing.
• Infrastructure investment (roads, railways) to support industry.

3️⃣ Tertiary Sector

• Digital India, Startup India, Skill India to boost services.
• Promoting IT-BPM sector and tourism industry.

🔹 Informal Sector – A Parallel Reality

In India, all three sectors have significant informal segments. From small farmers in primary sector to unregistered manufacturing units in secondary sector and informal services (domestic help, local transport) in tertiary sector.

📊 Sectoral Shifts – Clark-Fisher Hypothesis

This theory explains how:

1. Early economies are agriculture dominated.
2. Industrialization leads to dominance of secondary sector.
3. Services become dominant in advanced economies.

India is in the transition phase where services lead, but agriculture still employs the largest population.

🔔 MCQs

1️⃣ Consider the following statements regarding the Primary Sector:

1. It involves extraction and harvesting of natural resources.
2. It has the highest productivity among all sectors.
3. The employment share of the primary sector tends to decline with economic development.
4. Forestry and fishing are part of the primary sector.

Which of the above statements are correct?

✅ Options:
(a) 1, 3 and 4 only
(b) 1 and 4 only
(c) 2, 3 and 4 only
(d) 1, 2, 3 and 4

2️⃣ Which of the following are examples of the Secondary Sector?

1. Car manufacturing
2. Construction
3. Insurance services
4. Textile production

✅ Options:
(a) 1, 2 and 4 only
(b) 2 and 3 only
(c) 1 and 4 only
(d) 1, 2, 3 and 4

3️⃣ Which sector typically dominates in developed economies?

✅ Options:
(a) Primary sector
(b) Secondary sector
(c) Tertiary sector
(d) All equally

4️⃣ Consider the following statements regarding Tertiary Sector:

1. It includes services like banking, healthcare, and education.
2. It contributes the highest to India’s GDP.
3. Its employment share is higher than the primary sector in rural India.
4. Growth in the tertiary sector often follows growth in manufacturing.

Which of the above statements are correct?

✅ Options:
(a) 1 and 2 only
(b) 1, 2 and 4 only
(c) 2, 3 and 4 only
(d) 1, 2, 3 and 4

5️⃣ In the context of sectoral classification, agriculture is part of:

✅ Options:
(a) Primary sector
(b) Secondary sector
(c) Tertiary sector
(d) Quaternary sector