About Sectors of Indian Economy
India is one of the fastest-growing economies in the world and it is predicted that by 2050, it will become the second-largest economy in the world. There are many factors that contribute to the economy.
As of 2018, the Nominal (current) Gross Domestic Product (GDP) of the country is 2.72 lakh crores USD. The estimated nominal GDP of 2020 is USD 3.202 trillion (as per Wikipedia).
One might be curious about the elements that contribute to the Indian economy. To quench curiosity, the different sectors of the Indian economy are discussed here in detail.
There are three sectors of the Indian economy: the primary sector, the secondary sector, and the tertiary sector.
Classification and Examples
1. Primary sector
To keep the day-to-day operations going, this sector's services are completely reliant on the availability of natural resources. Eg. Agriculture, Mining, Fishing, Forestry, Dairy etc.
Agriculture, together with fisheries and forestry, accounts for one-third of India's GDP and is the single most important contributor. 18.20% of GDP contributes to the primary sector.
Agriculture has long been the backbone of India's economy. Aside from that, India is the world's largest producer of milk and the second-largest producer of wheat, sugar, freshwater fish, and groundnuts.
It is a significant producer of tea, cashews, sugar, ginger, turmeric, and black pepper.
The Indian agricultural sector was able to accomplish this remarkable feat as a result of the Indian government's several simultaneous revolutions.
The Black Revolution, which saw the production of petroleum, and the Brown Revolution, which saw the production of leather/non-conventional/cocoa, were both significant revolutions in India's primary sector.
Underemployment and disguised employment are two main issues that this sector faces.
2. Secondary sector
The economics of the sector is based on natural materials that are utilised to manufacture the services and goods that are given, and which are then consumed.
This sector transforms primary sector output (raw materials) into finished goods that can be sold to domestic businesses or consumers, as well as exported (via distribution through the tertiary sector). Many of these industries necessitate large amounts of energy, factories, and machinery, and they are often classified as light or heavy based on these features.
This sector is the best in terms of adding value to products and services. Transportation and industry are two of the most prominent examples of this area.
This sector employs over a quarter of India's total workforce. Furthermore, the secondary industry contributes nearly a quarter of GDP. This business is the backbone of the Indian economy and will continue to grow and prosper.
3. Tertiary sector
The tertiary sector is referred to as the service sector. The service business creates services rather than finished items. Services (also known as "Intangible Products") include things like attention, direction, access, experience, and emotional labour.
The industry's tertiary sector is in charge of delivering services to both businesses and end-users.
Rather than changing physical objects, the focus is on people by interacting with them and providing customer service.
The service industry includes certain significant services that do not directly contribute to the creation of commodities.
Goods manufactured in the primary or secondary sectors, for example, would have to be carried by logistics before being sold in wholesale or retail shops. This sector includes all service businesses, such as IT services, consulting, and so on. This industry accounts for more than 59 per cent of India's overall GDP.
Individuals who provide personal services, such as teachers, physicians, and others.
What is GDP?
The value of final products and services generated in a country during a given year is referred to as GDP.
Simply said, the total production of any sector for a given year is equal to the value of final goods and services produced in that sector for that year.
And the country's Gross Domestic Product—GDP—is calculated as the sum of production in three sectors.
The Increasing Importance of Tertiary Sector in Indian Economy
The tertiary industry overtook the primary sector as India's largest producing sector in 2013-14.
In India, the tertiary sector has grown in importance for the following reasons:
Among the most important services for all people are hospitals and schools as well as post and telegraph services. There are many critical services that have been added as essential services in the list.
Services like transportation, trade, and storage increase along with agriculture and industry.
As people's incomes rise, they expect more services like dining out, travel, shopping, private hospitals, schools, and professional training.
Over the last decade, new information and communication technology-based services have become critical.
Organized and Unorganized Sectors
Primary, secondary, and tertiary sectors of the economy are the most common divisions.
These are further divided into organised and unorganised sectors based on employment conditions.
The organised sector is made up of businesses where the terms of employment are set and predictable.
As a result, people are assured of employment.
Small and dispersed units that the government does not control make up the unorganised sector; as a result, there are rules and regulations in place, but they are not obeyed.
Below are a few of the differences between the two:
Differences Between Organized Sector and Unorganized Sector
FAQs on Sectors of the Indian Economy: Explained
1. What are the major sectors of Indian economy?
The Indian economy is broadly divided into three major sectors based on the nature of activities performed. These sectors are called the primary, secondary, and tertiary sectors. Each plays a unique role in the growth and structure of the national economy.
- Primary sector: Involves extraction and production of raw materials, like agriculture, fishing, and mining.
- Secondary sector: Covers manufacturing and industries, where raw materials are converted into finished goods.
- Tertiary sector: Encompasses services like banking, education, healthcare, and transport.
2. What are the 4 major sectors of the economy?
Economists often classify the economy into four major sectors based on activity and value generation. Beyond the traditional primary, secondary, and tertiary sectors, a fourth sector, called the quaternary sector, is recognized.
- Primary sector: Extraction of natural resources
- Secondary sector: Manufacturing and construction
- Tertiary sector: Services such as retail, transport, and banking
- Quaternary sector: Knowledge-based services like research, IT, and education
3. What is the 5 sector economy?
A five sector economy expands the traditional model by including the quinary sector along with the primary, secondary, tertiary, and quaternary sectors. The quinary sector represents high-level decision-making and top executives in society.
- Primary sector: Agriculture and raw materials
- Secondary sector: Manufacturing and construction
- Tertiary sector: General services
- Quaternary sector: Information services
- Quinary sector: Leadership roles, policymaking, and top management
4. What is the 4th largest sector in the Indian economy?
In India, the fourth largest sector in terms of GDP contribution and employment is the information technology (IT) and business process outsourcing (BPO) sector. This sector is part of the broader tertiary (services) and quaternary (knowledge) sectors. Its growth has transformed India into a global IT hub by providing high-value services to both domestic and international markets. The IT and BPO sector’s rapid expansion has generated millions of jobs and supports other sectors by improving efficiency and innovation. India's global reputation in IT has strengthened its economic standing and competitiveness worldwide.
5. How does the primary sector contribute to the Indian economy?
The primary sector is the foundation of India's economy, particularly in rural areas. It includes agriculture, forestry, fishing, and mining. This sector provides employment to a significant portion of India’s population, especially in villages. By producing raw materials and food, the primary sector ensures food security and supplies essential resources for industries. The growth of this sector also supports rural development and increases overall economic stability. Though its share in GDP has declined over the years, it remains vital for livelihoods and social development in India.
6. What role does the secondary sector play in India?
The secondary sector is responsible for manufacturing and transforming raw materials into usable goods. It includes industries such as textiles, chemicals, automobiles, and construction. This sector adds value to primary products and creates jobs in urban and semi-urban areas. Industrial development in the secondary sector supports exports and contributes to technological advancement. By boosting productivity and creating infrastructure, the secondary sector accelerates India’s economic growth and modernization.
7. Why is the tertiary sector growing rapidly in India?
India's tertiary sector, which covers services like banking, healthcare, tourism, and education, has seen rapid growth in recent decades. This expansion is driven by urbanization, increased incomes, and advances in technology.
- Changing lifestyles and demand for diverse services
- Rising investments in information technology and telecom
- Government support for service-based industries
8. What are the key differences between the sectors of Indian economy?
The primary, secondary, and tertiary sectors differ in their core activities, the nature of products, and employment generation. The primary sector deals with raw material extraction, while the secondary sector focuses on manufacturing. The tertiary sector is devoted to delivering services.
- Primary: Resource extraction (e.g., agriculture, mining)
- Secondary: Processing and production (e.g., factories, construction)
- Tertiary: Service provision (e.g., health, finance, transport)
9. How do government policies affect the sectors of the Indian economy?
Government policies have a significant impact on all sectors of the Indian economy. Policy decisions affect investment, employment, and growth opportunities through subsidies, tax incentives, and regulatory frameworks.
- Agriculture receives support through subsidies and minimum support prices
- Industry benefits from infrastructure programs and ease-of-doing-business reforms
- Services sector is enhanced through digitalization and financial sector reforms
10. How has the contribution of different sectors changed over time in India?
Over the years, the contribution of each sector to India's GDP and employment has shifted significantly. Initially, the primary sector dominated both output and employment. However, industrialization and technological advancement have increased the share of the secondary and tertiary sectors. Today, the services (tertiary) sector leads in GDP contribution, followed by industry and then agriculture. These shifts reflect India's path of economic diversification and modernization to meet changing demands.
