Sectors of the Indian Economy: Class 10 Economics · Chapter 2

Before you reached school this morning, many people had already worked for you. A dairy farmer milked her buffaloes before sunrise. A mill ground the wheat for your rotis. A bus or auto driver carried you through traffic, and a shopkeeper sold you a pen. Each of them was doing an economic activity: work done to earn a living by producing goods or services.

Crores of such activities go on across India every day. To make sense of them we sort them into groups called sectors, and the rule we sort by is called a criterion. This chapter uses three rules: the nature of the work (primary, secondary, tertiary), the terms on which people are employed (organised, unorganised) and who owns the enterprise (public, private). In Chapter 1, Development, you saw that good jobs, security and dignity are part of development. Each way of grouping shows where they are present and where they are missing.

2.1 Sectors of economic activities

Follow a cup of tea backwards. Before it reached your kitchen, the tea passed through three very different kinds of work, shown in Fig. 2.1.

First, someone had to grow it. On an estate in Assam, workers pluck young leaves from tea bushes that grew with sunlight, rain and good soil. People tend the bushes, but the leaf itself is made by a natural process. Rearing animals for milk, raising shrimp in ponds, cutting timber and digging coal or iron ore work the same way: we take what nature produces. Such activities form the primary sector (प्राथमिक क्षेत्रक). Most of its output comes from farming, animal rearing, fishing and forestry, which gives it a second name, the agriculture and related sector. And it is primary because it comes first: every other product starts from something this sector supplies.

Second, the leaves were processed. A tea factory withers, rolls, dries, sorts and packs them, and what comes out is a product that no bush could grow. When natural products are turned into new goods like this, the work belongs to the secondary sector (द्वितीयक क्षेत्रक). Size does not matter: a steel plant, a carpenter's shed where bamboo becomes chairs and a kitchen where pickle is bottled for sale are all manufacturing. The sector's other name, the industrial sector, comes from the factories and industries that grew up with it. India's official statistics also count construction and the supply of electricity, gas and water here.

Third, the packets had to reach you. Trucks carried them to a warehouse, a wholesaler bought them, a bank lent the trader money, phone calls fixed the orders and a shop near your home sold them. None of this work makes a new good, yet without it the tea would never leave the factory. Moving, storing, selling, financing and communicating are services that support production, and they belong to the tertiary sector (तृतीयक क्षेत्रक). Its other name says what it produces: the service sector.

Think too of services that have nothing to do with farms or factories. When you visit a doctor, sit in a class, get a haircut or hire a lawyer, you are buying a service for yourself, and these count in the tertiary sector as well. So do some of the fastest-growing activities of recent years, from mobile banking and online shopping to app development and data analysis.

Sectors depend on each other

Sorting activities into three groups is useful, but it can hide how closely the groups are tied together. Every sector buys from the other two and sells to them, so a shock to one sector travels to the rest. Read the four situations in Table 2.1 and decide what each one shows. The first is done for you.

So the three sectors are interdependent. Farms need factories for tools, pumps and fertiliser. Factories need farms and mines for raw materials. Both need transport, banks and traders, and everyone who works in any sector needs food. A slowdown in one sector soon means fewer buyers, and fewer jobs, in the others.

Practise sorting real jobs with the activity below. Its last tab shows something useful for later: the same job can be described by all three of this chapter's rules at once.

2.2 Comparing the three sectors

Which sector matters most in India? The answer depends on whether you count what is produced or who is employed, so we need both measures: how much each sector produces, and how many people work in it. The two answers rarely match. A sector can be large in output yet small in jobs, as we will see for India.

Measuring production raises a puzzle at once. How would you add 40 tractors, 5,000 haircuts and 30 tonnes of mangoes? The units do not match, so the total would mean nothing. Economists solve this by adding money values instead of quantities. Multiply what was produced by its price, and every item becomes a number of rupees, which can be added.

There is a trap, though. Many goods are sold not to the people who finally use them but to other producers, who use them up to make something else. Goods bought by the last user are final goods (अंतिम वस्तुएँ). Goods used up in making them are intermediate goods (मध्यवर्ती वस्तुएँ). Only final goods and services are counted. Why? Whatever was paid for the inputs is already built into the final price. Add the inputs too, and the same rupees are counted again and again, a mistake economists call double counting.

Value the final goods and services of one sector over one year and you have that sector's output. Total the three sectors and you have the measure economists watch most closely, the country's gross domestic product (GDP, सकल घरेलू उत्पाद). Domestic means made inside the country, whoever owns the firm: cars made in Gujarat by a Japanese-owned company count in India's GDP. GDP is the most common yardstick of the size of an economy.

Who does this counting? The National Statistics Office (NSO), part of the Union Ministry of Statistics and Programme Implementation (MoSPI). It pulls together figures from company filings, from surveys of farms, factories and households, and from government departments across the states and union territories. In February 2026 it moved its estimates to a new base year, 2022–23, using newer sources of data.

Sector-wise figures are published as gross value added (GVA, सकल मूल्य वर्धित) rather than GDP, in line with international practice. GVA is the value added by all the producers in a sector. The link between GVA and GDP is simple, as (2.2) shows: only taxes and subsidies on products separate them. In this chapter we use GVA to compare the sectors.

Historical change in sectors

Does each sector keep the same importance as a country develops? The history of today's rich countries, such as Britain, the United States and Japan, says no. Their story can be told in three stages, sketched in Fig. 2.5, and each shift has a cause.

Stage 1: mostly farming. When most families farm, the primary sector dominates both output and jobs. The way out begins on the farm itself: better seeds, tools and methods let each farmer feed more people than her own family. That surplus is what allows others to earn a living in a different way, by making things, trading or serving.

Stage 2: factories take over. Machines then made it possible to produce goods in large quantities at low cost. Over generations, work in factories grew faster than work on the land, and people left farming for industry, not always by choice: the History chapter The Age of Industrialisation tells part of that story. For a long period manufacturing was the largest sector in both output and employment.

Stage 3: services lead. Richer societies spend more and more on health, education, transport, finance, entertainment and government. During the twentieth century services overtook industry in developed countries, and today most of their output and most of their jobs are in the tertiary sector.

Has India changed in the same way? The next section looks at production and jobs in India.

2.3 Primary, secondary and tertiary sectors in India

Now let us look at India. Table 2.2 shows the value of goods and services produced in each sector in 2022–23 and in 2025–26, from the latest official estimates.

Production rose in all three sectors, but the tertiary sector added by far the most: about ₹47.6 lakh crore, more than the other two put together. Its share of GVA rose from about 52% to 54%, while the primary sector's share slipped from about 22% to 20%. These figures are at current prices, so part of each rise is just higher prices. Measured at constant prices, which remove price changes, the tertiary sector still added the most.

Rising importance of the tertiary sector in production

Why have services grown so much faster than farming and industry? There are several reasons. Step through them below.

Behind the big numbers, though, service workers live very different lives, as the comparison below shows. A software engineer and a cobbler both work in the tertiary sector, but only one of them is riding the boom. The other mends shoes because no better work came along, and earns barely enough to live on. The fast growth is real, but it reaches only one part of the sector.

Where are most of the people employed?

Production tells only half the story; the other half is jobs. Fig. 2.6 puts the two side by side for the latest years, and Table 2.3 gives the exact figures.

Put the two bars together and India's puzzle appears. Output has moved strongly towards services, but jobs have not followed nearly as much. In 2025, about 43 of every 100 workers were in the primary sector, almost all of them in farming, yet that sector produced only about a fifth of GVA. The tertiary sector produced more than half of GVA with less than a third of the workers. Farming remains the country's largest employer.

Why are so many people still on farms? Mainly because industry and services have not created jobs fast enough to absorb them. Factories and offices raised their output much faster than they hired, since machines, better methods and computers let them produce more with relatively few extra people. Those who could not find such jobs stayed on the land.

The low output per farm worker is not about effort. The real reason is crowding: agriculture holds more people than its work requires.

Underemployment: unemployment in disguise

Here is a way to see it. Suppose a 1.5-hectare rain-fed bajra field near Jhansi in Uttar Pradesh needs about 360 days of human work in the monsoon season, for ploughing, sowing, weeding, guarding and harvesting. Ramvati's family has five adults and no other source of work, so all five spend the season on the field: about 600 days of effort in all. The crop needs only 360. The extra 240 days add almost nothing to the harvest; they are simply spread across everyone, so each person works well below what they could.

This is underemployment: everyone is busy, yet each person does only a fraction of the work they could do. Because nobody looks jobless, it stays hidden. Compare it with open unemployment (खुली बेरोज़गारी), where a person who wants work has none at all and is plainly seen to be unemployed. That is why underemployment is also called disguised unemployment (प्रच्छन्न बेरोज़गारी). A simple test: if some of the workers left, would output fall? On Ramvati's field it would not.

If two of the five took jobs in a food-processing unit in town, the other three could still put in the 360 days the crop needs. The harvest would stay the same, and two wages would be added to the family's income. Across India, lakhs of farm families could release workers in this way without losing any crop, if only there were jobs for them elsewhere.

Cities have their own version. At a labour chowk in many Indian towns, workers gather at dawn and wait to be picked for a day's job; some days they are, some days not. Three cousins may share one paan stall that one person could run. Each looks employed, but there is not enough work, or income, to go round.

How to create more employment?

Two problems face us: many people in agriculture are underemployed, and some people have no work at all. What could create more work, and better work? Fig. 2.8 gathers some answers around a village.

Water for a second crop. Go back to Ramvati's field. With a farm pond built with government help, or a bank loan for a borewell and a solar pump, the family can also grow gram or mustard in the rabi season. The members who were idle after the monsoon harvest now have months of useful work. On a larger scale, a canal network can do this for hundreds of villages at once.

Roads, transport and storage. A bigger harvest helps only if it can be sold. An all-weather road to the mandi, a godown and a cold store let farmers sell when prices are fair instead of in a hurry. They also need drivers, loaders, mechanics and traders, all tertiary-sector jobs.

Credit at fair rates. Farming is paid for in advance: seed, fertiliser and diesel are bought months before the harvest brings in cash. A farmer forced to borrow from a moneylender at a steep rate may lose much of the profit to interest. Cheaper loans from banks, cooperatives or self-help groups keep more of the crop's value with the family. You will study this in Chapter 3, Money and Credit.

Industries near villages. Units that process local produce can be set up in small towns and semi-rural areas, close to the farmers who supply them. Think of a millet-processing unit where ragi and jowar are grown, a mango-pulp factory in a mango belt, a cashew-processing unit near the coast, or a bamboo-craft cluster in the North-East. Such units give jobs close to home, so people need not migrate to big cities.

Services that people need. Schools and health centres are themselves big employers: getting every child through school and a nurse into every village would need lakhs of teachers, nurses and health workers. Each region can also build on what it already has, such as Kerala's backwaters and Himachal's hills for tourism, Varanasi's silk and Bastar's metal craft, or software firms in towns like Coimbatore and Indore. These would advance the goals of development you met in Chapter 1 too.

A legal right to work

Most of these measures take years, and people without work need help now. India's answer is a legal guarantee of work. Under the National Rural Employment Guarantee Act of 2005, renamed the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in 2009, any rural household could ask for unskilled manual work. It had to be given up to 100 days of such work in a financial year, within 15 days of asking; otherwise the state paid an unemployment allowance. Because a household could claim this work as of right, the law is often called a right to work. Much of the work went into ponds, check dams, land levelling and tree planting, assets that make farmland more productive.

From 1 July 2026, MGNREGA was repealed. It was replaced by the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, or VB-G RAM G Act, which Parliament passed in December 2025. The comparison below sets the two laws side by side.

As with most big changes, views differ. The Union Government says the extra 25 days and the focus on lasting assets will raise rural incomes and build better villages. Some economists and state governments have asked whether states can afford their larger share of the cost, and whether fixed allocations will limit how much work is actually offered. Watching how the new law works in practice is part of understanding it.

2.4 Division of sectors as organised and unorganised

A third way of grouping looks at the terms on which people work. Is there a written contract? Are working hours fixed? Does any law protect the worker? Compare the working lives of two neighbours in Hyderabad.

Nasreen's employer is registered with the government and has to obey labour laws: that is what puts her job in the organised sector (संगठित क्षेत्रक). The word organised refers to the formal system of written terms, records and rules within which such firms work. Self-employed people can be in it too: a chartered accountant or a doctor with a registered practice follows the same kind of rules.

Fig. 2.9 lists what such a job usually brings. The most valuable item is the last one, security of employment: Nasreen cannot be dismissed on a whim. The law also protects her working hours, her overtime pay and her safety at work, including facilities such as clean drinking water. Her provident fund and gratuity, and in many jobs a pension, look after her old age.

Bittu's job sits in the unorganised sector (असंगठित क्षेत्रक). Its units are small and spread out, from a tea stall to a tiny workshop, and the government rarely checks them. Laws on wages and hours exist on paper but are seldom applied. So Bittu has no overtime pay, no paid holidays, no sick leave and no notice period; in a slack season he may simply be told not to come, and much depends on the owner's mood. The sector also covers crores of people who are their own employers, such as vendors, repairers and most farmers, who hire helpers only for the busy weeks.

How many Indians work on organised terms? The latest survey gives a rough idea. In 2025, 56.2% of workers were self-employed, 23.6% had regular wage or salaried jobs and 20.2% were casual labourers (PLFS Annual Report 2025). Nearly all casual labourers and most self-employed people work in the unorganised sector, and even some salaried employees have no written contract or social security. So only a minority of India's workers have organised-sector jobs.

How to protect workers in the unorganised sector?

Why does the unorganised sector stay so large? Three forces push people into it. Organised jobs have grown far more slowly than the number of people looking for work. Some firms that ought to be in the organised sector keep workers off their books, through contractors or by staying small on paper, to save on taxes and labour costs. And since the 1990s, closures of mills and factories have pushed many once-regular workers into street trade and odd jobs. More jobs alone will not fix this: the people already in the unorganised sector need protection and support too.

Small and marginal holdings, of less than 2 hectares, made up about 86% of all farm holdings in India in the Agriculture Census 2015–16. What would help such workers? A small farmer needs seed and fertiliser on time, cheap credit, a place to store the crop and a fair market. A small workshop needs easier access to raw materials and to buyers. A casual worker needs minimum wages that are enforced, a safe workplace and health cover.

The burden is not shared evenly. Workers from Scheduled Castes, Scheduled Tribes and other backward communities are more likely to be in unorganised work, and many face social discrimination on top of low and uncertain pay. So protecting these workers is a question of social justice as well as of economics.

Some steps have been taken. The e-Shram portal, launched on 26 August 2021, is a national database of unorganised workers. It links them to social security and welfare schemes, and it had 31.89 crore registrations by 18 August 2026 (PIB, 25 August 2026). The Code on Social Security, in force since November 2025, also brings gig and platform workers, such as delivery riders, within the reach of social security schemes.

2.5 Sectors in terms of ownership: public and private sectors

Ask a simple question about any enterprise: whose is it? If the government owns most of its assets and runs it, the enterprise is in the public sector (सार्वजनिक क्षेत्रक). If individuals or companies own it and run it, it is in the private sector (निजी क्षेत्रक).

NTPC, India's largest power company, the State Bank of India, Kendriya Vidyalayas and AIIMS hospitals are in the public sector. Infosys, Maruti Suzuki, a neighbourhood kirana shop and a private clinic are in the private sector. Ownership can change. Air India began as a private airline in 1932 and was taken over by the government in 1953. It returned to private hands when the Tata group bought it in January 2022.

The difference runs deeper than ownership. A private bus company runs a route because the fares cover its costs and leave a profit. A state transport corporation may also run a bus to a remote village where the fares never will, because the people there need it. The government pays for such services mainly out of taxes. Why does it take on so much?

Some things are too big for private firms. A long bridge across a big river can cost thousands of crores of rupees, take years to build and serve lakhs of people, most of whom would be hard to charge one by one; a private firm that did build it would need high tolls. Roads, railways, ports, power stations and irrigation dams are similar. So governments take on these huge projects and keep them open to everyone.

Some activities need government support. Small units such as power looms and flour mills use a lot of electricity; if they paid its full cost, many would close, so governments supply power to them at lower rates and bear part of the cost. Food grains get support at both ends. The Food Corporation of India procures wheat and rice at a minimum support price (MSP), which protects farmers' incomes, and the grain reaches poor households through ration shops at little or no cost: since 2024 it has been free for about 81 crore people. You met this public distribution system in the Class 9 chapter Food Security in India.

Some things are the government's responsibility. They are duties, not businesses:

• Schooling: the Right to Education Act, 2009 makes education free and compulsory for every child aged 6 to 14, and good elementary schools are the government's job.
• Health: in 2023 the infant mortality rate was 37 per 1,000 live births in Madhya Pradesh and 30 in Odisha, against 5 in Kerala (Sample Registration System). Your textbook quotes older figures of 43 and 36.
• Nutrition: about 36% of India's children under five were stunted in 2019–21 (NFHS-5).
• Water and housing: safe drinking water for all, and homes for the poor.
• Neglected regions: extra spending in the poorest and most backward areas.