RISING IMPORTANCE OF TERTIARY SECTOR IN PRODUCTION

RISING IMPORTANCE OF TERTIARY SECTOR IN PRODUCTION

Primary, secondary and tertiary sectors in India

Graph 1 shows the production of goods and services in the three sectors. This is shown for two years, 1973-74 and 2013-14. We have used the data for these two years because the data are comparable and authentic. You can see how the total production has grown over the forty years.   

Graph 1: GDP by Primary, Secondary and Tertiary Sectors

Rising Importance

Over the forty years between 1973-74 and 2013-14, while production in all the three sectors has increased, it has increased the most in the tertiary sector. As a result, in the year 2013-14, the tertiary sector has emerged as the largest producing sector in India replacing the primary sector.

Why is the tertiary sector becoming so important in India? There could be several reasons.

1.   In any country, several services such as hospitals, educational institutions, post and telegraph services, police stations, courts, village administrative offices, municipal corporations, defense, transport, banks, insurance companies, etc. are required. These can be considered as basic services. In a developing country, the government has to take responsibility for the provision of these services.

2.   The development of agriculture and industry leads to the development of services such as transport, trade, storage and the like, as we have already seen. The greater the development of the primary and secondary sectors more would be the demand for such services.

3.    As income levels rise, certain sections of people start demanding many more services like eating out, tourism, shopping, private hospitals, private schools, professional training, etc. You can see this change quite sharply in cities, especially in big cities.

4.   Over the past decade or so, certain new services such as those based on information and communication technology have become important and essential. The production of these services has been rising rapidly. In Chapter 4, we shall see examples of these new services and the reasons for their expansion.

However, you must remember that not all of the service sector is growing equally well. Service sector in India employs many different kinds of people. At one end there are a limited number of services that employ highly skilled and educated workers. At the other end, there are a very large number of workers engaged in services such as small shopkeepers, repairpersons, transport persons, etc. These people barely manage to earn a living and yet they perform these services because no alternative opportunities for work are available to them. Hence, only a part of this sector is growing in importance. You shall read more about this in the next section.

Let’s work these out

Answer the following questions by looking at the graph:

1.  Which was the largest producing sector in 1973-74?       

2.  Which is the largest producing sector in 2013-14?

3.  Can you say which sector has grown the most over forty years?

4.  What was the GDP of India in 2013-14?

Source: This topic is taken from NCERT TEXTBOOK

WHERE ARE MOST OF THE PEOPLE EMPLOYED?

WHERE ARE MOST OF THE PEOPLE EMPLOYED?

Graph 2 presents percentage share of the three sectors in GDP. Now you can directly see the changing importance of the sectors over the forty years.   

Graph 2: Share of Sectors in GDP (%)

A remarkable fact about India is that while there has been a change in the share of the three sectors in GDP, a similar shift has not taken place in employment. Graph 3 shows the share of employment in the three sectors in 1977-78 and 2017-18. The primary sector continues to be the largest employer even now.

Graph 3: Share of Sectors in Employment (%)

Why didn’t a similar shift out of primary sector happen in case of employment? It is because not enough jobs were created in the secondary and tertiary sectors. Even though industrial output or the production of goods went up by more than nine times during the period, employment in the industry went up by around three times. The same applies to the tertiary sector as well. While production in the service sector rose by 14 times, employment in the service sector rose around five times.

As a result, more than half of the workers in the country are working in the primary sector, mainly in agriculture, producing only about one sixth of the GDP. In contrast to this, the secondary and tertiary sectors produce the rest of the produce whereas they employ less about half the people. Does this mean that the workers in agriculture are not producing as much as they could?

What it means is that there are more people in agriculture than is necessary. So, even if you move a few people out, production will not be affected. In other words, workers in the agricultural sector are underemployed.

For instance, take the case of a small farmer, Laxmi, owning about two hectares of unirrigated land-dependent only on rain and growing crops, like jowar and arhar. All five members of her family work in the plot throughout the year. Why? They have nowhere else to go for work. You will see that everyone is working, none remains idle, but in actual fact, their labour effort gets divided. Each one is doing some work but no one is fully employed. This is the situation of underemployment, where people are apparently working but all of them are made to work less than their potential. This kind of underemployment is hidden in contrast to someone who does not have a job and is clearly visible as unemployed. Hence, it is also called disguised unemployment.

Now, supposing a landlord, Sukhram, comes and hires one or two members of the family to work on his land. Laxmi’s family is now able to earn some extra income through wages. Since you do not need five people to look after that small plot, two people moving out does not affect production on their farm. In the above example, two people may move to work in a factory. Once again the earnings of the family would increase and they would also continue to produce as much from their land.

There are lakhs of farmers like Laxmi in India. This means that even if we remove a lot of people from the agricultural sector and provide them with proper work elsewhere, agricultural production will not suffer. The incomes of the people who take up other work would increase the total family income.

This underemployment can also happen in other sectors. For example, there are thousands of casual workers in the service sector in urban areas who search for daily employment. They are employed as painters, plumbers, repairpersons and others doing odd jobs. Many of them don’t find work every day. Similarly, we see other people of the service sector on the street pushing a cart or selling something where they may spend the whole day but earn very little. They are doing this work because they do not have better opportunities.

Let’s work these out

1.  Complete the table using the data given in Graphs 2 and 3 and answer the question that follows. Ignore if data are not available for some years. 

Table 2.2: Share of the primary sector in GDP and employment

What are the changes that you observe in the primary sector over a span of forty years?

2.  Choose the correct answer:

Underemployment occurs when people

       (i)  do not want to work.

      (ii)  are working in a lazy manner

      (iii) are working less than what they are capable of doing

      (iv) are not paid for their work

3.  Compare and contrast the changes in India with the pattern that was observed for developed countries. What kind of changes between sectors were desired but did not happen in India?

4.  Why should we be worried about underemployment?

Source: This topic is taken from NCERT TEXTBOOK

HOW TO CREATE MORE EMPLOYMENT?

HOW TO CREATE MORE EMPLOYMENT?

From the previous discussion, we can see that there continues to be considerable underemployment in agriculture. There are also people who are not employed at all. In what ways can one increase employment for people? Let us look at some of them.

Take the case of Laxmi with her two-hectare plot of unirrigated land. The government can spend some money or banks can provide a loan, to construct a well for her family to irrigate the land. Laxmi will then be able to irrigate her land and take a second crop, wheat, during the rabi season. Let us suppose that one hectare of wheat can provide employment to two people for 50 days (including sowing, watering, fertilizer, application and harvesting). So, two more members of the family can be employed in her own field. Now suppose a new dam is constructed and canals are dug to irrigate many such farms. This could lead to a lot of employment generation within the agricultural sector itself reducing the problem of underemployment.

Now, suppose Laxmi and other farmers produce much more than before. They would also need to sell some of this. For this they may be required to transport their products to a nearby town. If the government invests some money in transportation and storage of crops, or makes better rural roads so that mini-trucks reach everywhere several farmers like Laxmi, who now have access to water, can continue to grow and sell these crops. This activity can provide productive employment to not just farmers but also others such as those in services like transport or trade.

Laxmi’s need is not confined to water alone. To cultivate the land, she also needs seeds, fertilisers, agricultural equipment and pumpsets to draw water. Being a poor farmer, she cannot afford many of these. So, she will have to borrow money from moneylenders and pay a high rate of interest. If the local bank gives her credit at a reasonable rate of interest, she will be able to buy all these in time and cultivate her land. This means that along with water, we also need to provide cheap agricultural credit to the farmers for farming to improve. We will look at some of these needs in Chapter 3, Money and Credit.

Another way by which we can tackle this problem is to identify, promote and locate industries and services in semi-rural areas where a large number of people may be employed. For instance, suppose many farmers decide to grow arhar and chickpea (pulse crops). Setting up a dal mill to procure and process these and sell in the cities is one such example. Opening a cold storage could give an opportunity for farmers to store their products like potatoes and onions and sell them when the price is good. In villages near forest areas, we can start honey collection centres where farmers can come and sell wild honey. It is also possible to set up industries that process vegetables and agricultural produce like potato, sweet potato, rice, wheat, tomato, fruits, which can be sold in outside markets. This will provide employment in industries located in semi-rural areas and not necessarily in large urban centres.

Figure: Gur Making in Haryana

Do you know that in India about 60 percent of the population belongs to the age group 5-29 years? Out of this, only about 51 percent are attending educational institutions. The rest are not— they may be at home or many of them may be working as child labourers. If these children are to attend schools, we will require more buildings, more teachers and other staff. A study conducted by the erstwhile Planning Commission (now known as NITI Aayog) estimates that nearly 20 lakh jobs can be created in the education sector alone. Similarly, if we are to improve the health situation, we need many more doctors, nurses, health workers etc. to work in rural areas. These are some ways by which jobs would be created and we would also be able to address the important aspects of development talked about in Chapter 1.

Every state or region has potential for increasing the income and employment for people in that area. It could be tourism, or regional craft industry, or new services like IT. Some of these would require proper planning and support from the government. For example, the same study by the Planning Commission says that if tourism as a sector is improved, every year we can give additional employment to more than 35 lakh people.

We must realise that some of the suggestions discussed above would take a long time to implement. For the short-term, we need some quick measures. Recognising this, the central government in India made a law implementing the Right to Work in about 625 districts of India. It is called Mahatma Gandhi National Rural Employment Guarantee Act 2005  (MGNREGA  2005). Under MGNREGA 2005, all those who are able to, and are in need of, work in rural areas are guaranteed 100 days of employment in a year by the government. If the government fails in its duty to provide employment, it will give unemployment allowances to the people. The types of work that would in the future help to increase the production from land will be given preference under the Act.

Activity:

1. What groups of people do you think are unemployed or underemployed in your area?

2. Can you think of some measures that could be taken up for them?

Let’s work these out

1.  Why do you think MGNREGA 2005 is referred to as ‘ Right to work’?

2.  Imagine that you are the village head. In that capacity suggest some activities that you think should be taken up under this Act that would also increase the income of people? Discuss.

3.  How would income and employment increase if farmers were provided with irrigation and marketing facilities?

4.  In what ways can employment be increased in urban areas?

Source: This topic is taken from NCERT TEXTBOOK