Sectorial Aspects of Indian Economy

To earn livelihood people pursue different types of activities based on their education, skill, family tradition etc. These are classified into three different sectors of the economy.

  1. Primary sector
  2. Secondary sector
  3. Tertiary sector

1. Primary Sector

May of the people who are living in villages earn their livelihood by working on the fields to raise crops, which is known as cultivation. They are known as farmers and agricultural labourers and the occupation is called agriculture. There are different types of crops which are cultivated; such as food items and non food items. Food items include cereal, pulses, fruits and vegetables. and non-food items include cotton, jute.

Similarly people also earn their livelihood from forestry which refers to collection of forest products and selling them in the market. This occupation is called forestry. Forest products include timber, firewood, herbal medicines. Many people work in mining area to extract minerals. There also people who are engaged in raising live stock such as poultry and dairy farming.

Finally, fishery is another occupation in which people catch fish in ponds, rivers or sea to sell them in the market. All these activities i.e. agriculture, forestry, mining, livestock and fishery are complementary to each other. We classify them as primary production and place them in primary sector. So, primary sector of our economy includes the following:

  1. Agriculture and allied activities
  2. Fishery
  3. Forestry
  4. Mining and Quarrying

Villages have been existing from ancient days in India and agriculture and the allied actives are very traditional occupation of people. It comes naturally to them because food which comes from agriculture is the basic need of life. But with progress of time human settlements have expanded beyond villages. Towns and cities have come up in the process of development. These are called urban areas. These urban areas are known for its non-agricultural occupation. Non agricultural activities are divided into two sectors:

  1. Secondary Sector
  2. Tertiary Sector

2. Secondary Sector

This sector includes the following production activities:

  1. Manufacturing
  2. Construction
  3. Gas, water and electricity supply


This implies production of goods by using raw materials in manufacturing units called factories and industries. In terms of size and expenditure involved there are small and large scale industries. Examples of small scale units are: shoe factory, textile unit, printing, glass making, furniture. The large scale manufacturing includes steel, automobiles, aluminium. Skilled people work in manufacturing business.


This activity includes construction of residential and non-residential buildings, roads, parks, bridges, dams, airports, bus stops and so on. It is a regular activity seen in urban areas. 

Another occupation people pursue in secondary sector is gas, water and electricity supply. These are essential services.

3. Tertiary Sector

People are also engaged in tertiary sector activities which are different in nature. This sector is called service sector where following services are provided:

  1. Trade, Hotels and Restaurants
  2. Transport, Storage and Communication
  3. Financial services such as Banking, Insurance
  4. Real estate and Business services
  5. Public Administration
  6. Others services

Role and Importance of Primary Sector

In the primary sector agriculture is the predominance occupation and has the largest share in national income.

1. Share in National income

At the time of independence agriculture was contributing more than 50 percent to national income. In recent years its share has come down.

2. Providing employment to largest section of population

Agriculture is the mainstay of Indian economy. It is the occupation of the largest section of India’s population. At the time of independence about 70 percent of the population depended on agriculture and allied activities to earn their livelihood. With development of manufacturing and service sector dependency on agriculture has slightly reduced.

3. Providing Food to Millions

Food is the most basic requirement of life. Without agriculture food production and supply would be non-existent. India’s food requirement is not only very high but also increasing every year because of increase in its population.

4. Providing raw materials to industries

Industries such as sugar, jute, cotton textiles, vanaspati get their raw materials from agriculture. Without agriculture paper production is not possible. Food processing industry is operating because of agriculture only.

Role and Importance of Secondary Sector

In the secondary sector manufacturing industries form the major part. These industries are categorised into small scale industry and large industry. An industry which can be established by spending a minimum of Rs. 25 lakh on plants and machinery is called a small scale industry. These industries mostly use labour-intensive technology. i.e. production process of these industries use more labour force. Large scale industry, on the other hand needs huge amount of investment in the form of plant and machinery. It is also physically spread over many acres of land and employs large number of people. It also uses capital intensive technology in the form of big machines.

The importance of Industrial sector, both small and large, has been increasing after independence.

1. Share in national income

The contribution of industrial sector has been increasing slowly over time after independence. At the time of independence it was only 14 percent. The increase is due to increase in number of manufacturing units and increase in industrial production.

2. Employment generation

Industrial sector has also largely contributed to providing employment opportunities to India’s population.

3. Creation of Infrastructure

Today it has become easier to travel to distant places because of existence of roads, highways, railways, airways. Big dam projects provide electricity and irrigation. Buildings accommodate offices, shopping centres, factories, institutions and provide residences. Radio and Telephone towers facilitate communication. These are all part of infrastructure. Infrastructure building is possible because of contribution of large scale industries which make the machinery and equipment needed build infrastructure.

4. Provision of consumer goods

The clothes, stationery items, the tooth brush, soap, shoes, cycle, scooter, car and other products are produced by manufacturing industries. Today, the market is flooded with many goods. This is possible because of industrialisation.

Role and Importance of Services Sector

Service sector of India has been expanding and growing very fast.

1. Contribution to National Income

Among all the three sectors i.e. agriculture, industry and service, it is the service sector that has contributed maximum to the national income of India.

2. Contribution to Employment

Now a days more and more people are getting employment in service sector. The main reason is that the number of educated people in India is increasing every year. They belong to various fields such as matriculates, graduates in arts, commerce, science, engineering, medicine and other professional and vocational streams. Service sector needs these people.

In terms of wages and salaries, service sector, pays more than that of agricultural sector. Compared to agriculture, service sector provides more job opportunities. There is existence of large varieties of services which are provided round the year. But there are some seasonal activities in agriculture. So as people become more educated they move to service sector. So employment in service sector is increasing.

3. Attracting Funds from Foreign Countries

Looking at the growth of service sector of India people from foreign countries are showing more interest to invest money in this sector to earn profit. For example, banking, insurance, trade, transport, hotel services. Recently computer service has grown many fold in India. If investments are made then more job opportunities are created. This is advantageous for the nation.

3. Contribution of Service Sector to Exports

Exporting means selling goods and services to citizens in foreign countries to earn foreign exchange in the form of dollar, euro, yen, pound. In recent years India’s service sector has contributed a lot in earning foreign exchange for the country through exports. The business services which include IT, consultancy, legal services, etc. have become world standard.