Differentiate between primary, secondary and tertiary sectors of the economy.
Occupation wise an economy is broadly divided into primary, secondary and tertiary sectors. Primary sector includes production units producing goods by exploiting natural resources. Some examples are farming, mining, fishing, animal husbandry, etc. Most of such economic activities are usually carried out in rural areas. The secondary sector includes production units engaged in transforming goods from one form into another.
Some examples are production of bicycles, scooters, and television. Most of these activities are carried out in a factory or mill. The tertiary sector includes units producing only services like banks, transport shops, insurance government department, domestic servants, etc.
Relative comparison of performance of these sectors in the field of production and contribution to national income is the point of interest both for government and people. An unusual fall in the contribution of a sector alarms the government because the performances of these sectors is dependent on each other.
For example, if agricultural production is low supply of raw materials to the secondary sector will also be low and consequently the production. As a result the demand for services is also likely to be low. So if agriculture suffers, other sectors suffer too. The government may then have to import raw materials and food from abroad and spend valuable foreign exchange.
If the secondary sector’s production is low, the primary sector is also likely to suffer in terms of low demand for raw materials. From the above it is clear that all parts of economy should grow. However, growth of a sector should not be confused with the share of a sector in the national income.
For example, for development it is necessary for the agricultural sector to grow, but it is also broadly true that over the course of a nation’s development over time, the share of agriculture in the national income falls, while that of the secondary and tertiary sectors grow.
Data obtained in the process of estimating national income through the production method can supply the required information about the various sectors of the economy. At present, the estimates of National Income in India are prepared by Central Statistical Organization (CSO). National Income is estimated by taking the total of value of production of various sectors like consumer goods and services, capital goods and services, production by government etc.
National Income is also estimated by taking total various factor incomes like wages, rent, interest and profit. In this method National Income is estimated for different activities in different ways. E.g. SSI, unregistered manufacturing, roads and water transport, trade, hotels and restaurants etc., national income estimates are prepared by finding out Average Productivity. After that, Average Productivity is multiplied by the total number of workers.