SECTORS OF INDIAN ECONOMY:Introduction to Indian Economy:

The economy of India is a developing mixed economy. It is the world's sixth-largest economy by nominal GDP. The country ranks 141st in per capita GDP (nominal) with $1723 and 123rd in per capita GDP (PPP) with $6,616 as of 2016. Indian Economy is a developing economy in which Agriculture is the backbone of the Economy. Approximately 67% of Indian population is engaged in agriculture and allied activities. As per UNDP Human Resource Development report 2013-14, 55% Indian population is Below Poverty Line(BPL). Although after 1991 economic liberalisation, India achieved 6-7% average GDP growth annually, But even today agriculture is one of the leading employment generating sector of the Indian Economy. In FY 2015 and 2017 India's economy became the world's fastest growing major economy surpassing China. India has emerged as the fastest growing major economy in the world as per the Central Statistics Organisation (CSO) and International Monetary Fund (IMF).The Government of India has forecasted that the Indian economy will grow by 7.1 per cent in FY 2016-17.

The Indian economy expanded 5.7 % year-on-year in the second quarter of 2017, below 6.1 % in the previous period and market expectations of 6.6 %. It remains the weakest growth rate since the first quarter of 2014 due to a slowdown in consumer spending and exports. On the production side, manufacturing and agriculture sectors’ showing decreased figures for the second quarter of 2017 mark the third consecutive period of slowing growth, following the demonetization program started in November of 2016 that removed 99 % of India's currency in circulation.

FEATURES OF INDIAN ECONOMY: The Indian economy has following features:INDIA HAS A MIXED ECONOMY:

The first Prime Minister of India Pt. Jawahar Lal Nehru was influenced by Russian Revolution,1917 and wish to achieve the aim of socialistic society, but he does not want to achieve this aims with armed revolution. Instead of this Nehru want to achieve socialism through democratic way for this reason he has adopted Mixed Economy Model for National Development. This means both private and public sectors co-exist and function here, simultaneously. On one side, some of the fundamental and heavy industrial units are being operated under the public sector. Whereas, due to the liberalization factors of the economy, the private sector has gained further enhancements in terms of scope.AGRICULTURE PLAYS THE KEY ROLE IN SUPPORTING THE INDIAN ECONOMY:

Around 67% of the occupational practice in India is covered by the farmers and other agricultural activities. This gives a higher impact on the Indian economy, both directly and indirectly. In fact, about 14.30% of our GDP today is earned from the agricultural sector itself. Agriculture products constitute near about 10% of the Total Export of the Country.NEWLY INDUSTRIALIZED ECONOMY – GOOD BALANCE BETWEEN AGRICULTURE AND INDUSTRIAL SECTOR:

Earlier agriculture used to be the prime contributor to national Income and industrialization was at a lower edge during that time. With the growing time, subsequently industrialisation took a high tide in the country making it a very important contributor to it national GDP.AN EMERGING MARKET

Holding a constant high GDP growth rate even in the downfall situations, it has kept its position intact, has made it a lucrative spot for the other economies to invest. A MAJOR ECONOMY

Emerging as a top economic giant among the world economy, India bags the seventh position in terms of nominal Gross Domestic Product (GDP) and third in terms of Purchasing Power Parity (PPP). These figures are an impressive representation of the Indian economy among the G8, G20, SAARC, BRICS, and rest of the countries of World.INSTABILITY OF PRICE – COST OF PRODUCTS IS NOT STABLE

Even though there has been a constant growth rate in the GDP and growth opportunities in the Indian economy, but there have been fluctuations in the price concerns too since decades.INADEQUATE EMPLOYMENT OPPORTUNITIES

Comparing the growth rate of the economy in the last few decades there has been a gradual high-rise in the same. The population rate has also grown on a large-scale; this has been the biggest challenge for the growth of the economy. With growing population there is a huge need of the employment opportunities too!UNEQUAL WEALTH DISTRIBUTION

The Indian economy bears a great disparity between the rich and the poor. There is a complete lop-sided distribution of the wealth in the economy. This is why the rich are becoming richer and the poor are growing even poor in the economy levels.

SECTORS OF INDIAN ECONOMY :

Primary Sector: When the economic activity depends mainly on exploitation of natural resources then that activity comes under the primary sector. Agriculture and agriculture related activities are the primary sectors of economy.

Secondary Sector: When the main activity involves manufacturing then it is the secondary sector. All industrial production where physical goods are produced come under the secondary sector. Tertiary Sector: When the activity involves providing intangible goods like services then this is part of the tertiary sector. Financial services, management consultancy, telephony and IT are good examples of service sector. SECTORS OF INDIAN ECONOMY

Evolution of an Economy from Primary Sector Based to Tertiary Sector Based:

During early civilization all economic activity was in primary sector. When the food production became surplus people’s need for other products increased. This led to the development of secondary sector. After growth of previous two economic activities a support system was the need to facilitate the industrial activity. Certain sectors like transport and finance play an important role in

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SECONDARY SECTOR

TERTIARY SECTOR

supporting the industrial activity, more shops became need and then ultimately, other services like tuition, administrative support developed. These all came under tertiary sector. 

Interdependency of economic sectors (An example of cold drink) • A cold drink contains water, sugar and artificial flavor. Suppose if there is no sugarcane production then procuring sugar will become difficult and costly for the cold drink manufacturer. • Now to transport sugarcane to sugar mills and sugar to the cold drink plant needs the services of a transporter. A person or system of persons is required to maintain and monitor all these movements of goods from farm to factory to shop in different locations. That is where role of administrative staffs comes.• Let us go back to the farmer. He also needs fertilizers and seeds which is processed in some factory and which will be delivered to his doorstep by some means of transportation. • To top it all, at every step of these activities we require the proper monetary and banking system. So, in a nutshell this describes how interrelated all sectors of an economy are.

SECONDARY SECTOR:Secondary sector includes all branches of human activities that transform raw materials into products or goods. It includes secondary processing of raw materials, food manufacturing, textile manufacturing and industry. Secondary activities add value to natural resources by transforming raw materials into valuable products. Secondary activities, therefore, are concerned with manufacturing, processing and construction (infrastructure) industriesEXAMPLE: Textile production, car manufacturing and handicrafts.Meaning of Secondary Sector:ETYMOLOGICAL MEANING:

Derived from ‘Latin’ word ‘Secundarius’ which means of second class or qualityOr One step after the firstDEFINITIONS:

Dictionary meaning : the sector of the economy concerned with or relating to secondary industry.

Wikipedia : secondary sector include industries that produce a finished, usable product or are involved in construction.

Business Dictionary : The portion of an economy that includes light and heavy industrial manufacturers of finished goods and products from raw materials. 

COMPONENTS OF SECONDARY SECTOR

COTTAGE INDUSTRIES:

These industries run either whole time or part time whose labor force consists of family units or individuals working at home with their own equipment. Capital invested in these units is very small.

Example: Papad, pickle, candle making, handicrafts

• In accordance with the provisions of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006, the Micro, Small and Medium Enterprises (MSME) are classified into two groups

• (a) Manufacturing Enterprises • (b) Service Enterprises • The limit for investment in plant and machinery / equipment for

manufacturing / service enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 is as under:

• MICRO ENTERPRISE: A micro-enterprise is one where the investment in plant and machinery (the original cost excluding land, building and items specified by the Ministry of MSME in its notification No.S.O.1722 (E) dated october 5, 2006) does not exceed Rs.25 lakh.

• SMALL ENTERPRISE: A small enterprise is one where the investment in plant and machinery (see above) is more than Rs.25 lakh but does not exceed Rs.5 crore.

Cottage industries

Micro enterprises

Small enterprise

Medium enterprises

Large scale industries

Semi automated industries

Automated industries

• But Now this definition has been revised as below:• A micro enterprise is an enterprise where investment in plant and

machinery does not exceed Rs. 1 Crore.• A small enterprise is an enterprise where the investment in plant

and machinery is more than Rs. 1 Crore lakh but does not exceed Rs. 5 Crore;

• A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

• Large scale industries : the industrial units in which investment is more than the maximum limit of investment in medium enterprises and combine at least three characteristics: use of machinery, employment of wage labor, and the application of regulatory measures such as the Factory Act or Disputes Act.

Example : iron &steel, machines, chemicals, refineries, cement, textile industry etc.

The definition of MSMEs in the service sector is:

MICRO-ENTERPRISE: investment in equipment does not exceed Rs.10 lakh.

SMALL ENTERPRISE: investment in equipment is more than Rs.10 lakh but does not exceed Rs.2 crore

Medium enterprise: investment in equipment is more than Rs.2 crore but does not exceed Rs.5 crore.

CHARACTERISTICS OF SECONDARY SECTOR:

Specialization of Skills/Methods of Production:

Under the ‘craft’ method factories produce only a few pieces which are made-to-order. So the costs are high. On the other hand, mass production involves production of large quantities of standardized parts by each worker performing only one task repeatedly

Mechanisation:

Mechanisation refers to using gadgets which accomplish tasks. Automation (without aid of human thinking during the manufacturing process) is the advanced stage of mechanization. Automatic factories with feedback and closedloop computer control systems where machines are developed to ‘think’, have sprung up all over the world.

Technological Innovation:

Technological innovations through research and development strategy are an important aspect of modern manufacturing for quality control, eliminating waste and inefficiency, and combating pollution.

Organizational Structure and Stratification:

Modern manufacturing is characterized by:

(i) a complex machine technology

(ii) extreme specialization and division of labor for producing more goods with less effort, and low costs

(iii) vast capital

(iv) large organizations

Uneven Geographic Distribution:

Major concentrations of modern manufacturing have flourished in a few number of places.

Industrial development under FIVE YEAR PLANS:

1. FIRST FIVE YEAR PLAN (1951-56):

On the eye of the First Five Year Plan was based on Harrod- Domer Model of Economic Growth which favour Industrial Development to develop the nation. The Industrial Development in India was confined largely to the consumer goods sector. The goal on the Industrial front was to make better utilisation of existing capacity and to go in for some renovation and modernisation. With an overall increase of 38% in industrial production, during 1st plan. During this period basic industries steel, coal, cement were made to developed. During the plan, 5% of the total plan expenditure was made on industries. Of this, Rs. 74 crore were on large industries in public sector whereas Rs. 43 crore were spent on small industries.  The industrial production increased at the rate of 6.68 per cent per annum. 

2. SECOND FIVE YEAR PLAN (1956-61):

The Second Five Year Plan accorded top priority to programme of Industrialisation .Based on the Mahalanobis model, the 2nd plan

emphasised the setting up of Basic and Heavy Industries so as to establish a strong base for rapid industrialisation, self-reliance, technological development. As per the Industrial Policy Resolution of 1956, Public Sector Steel Plants were established at Rourkela in Odisha, Bhilai in MP and Durgapur in West Bengal. The investment in the public sector was Rs. 870 crores. The Industrial Production Index rose from 139 in 1955-56 to 194 in 1960-61. Almost all the plants which were established in the plan were established in backward areas. In the second five years plan 24% of the total plan was directed to industrial development. On large scale industries total expenditure was recorded to be Rs. 938 crore and on small scale industries it was only Rs. 187 crore. Annual growth rate was 7.25%.

3.THIRD FIVE YEAR PLAN (1961-66):

The third plan saw the beginning of long term perspective planning as an instalment to achieve the objective of an ‘Integrated Growth of Industry and Agriculture’. The basic strategy was the development of public sector and heavy industries so as to attain a self sustaining growth.The Second and Third Plans placed great emphasis on building up the capital goods industries and basic industries. As a result the ‘Industrial Structure’ built up over these plans was heavily biased in favour of these industries. Emphasis on development of basic capital and producer goods industries. In the third five year plan, total expenditure on large scale industries was Rs. 1726 crore. In the private sector, the expenditure was Rs. 1 300 crore, while Rs. 241 crore were spent on the development of small industries. there was sharp deterioration in the rate of growth of output. It fell to 4.3 per cent in 1965-66. Three Annual Plans (1966-69):

In view of the severe drought conditions during 1966-68 there was a great setback to the economic and industrial development of the nation. Over and above severe short falls in the planned production during the ‘Third Plan forced the Government of India to postpone the formulation and implementation of the Fourth Five Year Plan and to adopt Annual Plans.Fourth Five Year Plan (1969-74):

In the Fourth Plan, as against the planned increase of 8% in industrial production per annum, actual rate achieved was only around 5% per annum. Nearly 75% of the total investment was in the core sector, viz., Iron and Steel, Non-Ferrous. metals, Fertilisers, Petrochemicals, Coal and Iron Ore etc. There were widespread shortage of power and Agricultural Raw Materials for Industry.Industrial production during this plan increased only by 4% per annum against the target of 8-10% per annum .Sluggishness of demand, shortage of basic inputs, labour unrest and low capacity utilisation were mainly responsible for poor performance of the industrial sector during this plan.Fifth Five Year Plan (1974-1979)

The fifth plan focussed on rapid development of the core sector covering steel, machine building, power, coal, petroleum products arid export oriented industries and consumer goods industries ·such as sugar; drugs textiles etc. The industrial growth was slow despite the introduction of several incentives to private sector (delicensing of 21 items). The following were the reasons for slow growth:

Imbalances in production of Basic Industrial Inputs

Unremunerative prices and

Industrial unrest.The achieved growth rate in the industrial production during the plan was around 5.2% per annum. Thus structure of Industrial development, was promoted and nurtured in the 4th and 5th plans with minor changes here and there.Sixth Five Year Plan (1980-1985):

On the eve of the sixth plan, a stock-taking of the industrial progress over the previous 35 years, showed that the industrial production increased by almost 5 times and Industrial Structure had been widely diversified covering broadly the entire range of consumer, intermediate and capital goods. The plan provided for large outlays for five Industries, viz., Steel, Petroleum, Coal, Fertilisers, Petro Chemicals. However, as in the earlier

periods the growth was slow due to transport and power bottlenecks, labour militancy and raw material shortage.Seventh Five Year Plan (1985-1990):

The VIIth plan, with an outlay of Rs. 30,000 crore for the Industrial Sector, re-emphasized the earlier objective of rapid economic growth with social justice. The main features of industrial development during the VIlth Plan, were:

Adequate supply of consumer articles for mass consumption at reasonable prices.

Development of Industries with large domestic market and also export potential to emerge as World leaders in them; and

Integrated development of Industries in general to achieve self reliance and high employment generation.

The average growth rate of Industry in the 7th plan was 8.5% per annum as against the target of 8% per annum. This sizeable growth was due to a number of factors:

Improvement in Performance of Infrastructure.

Higher Import of Capital Goods,

Better utilisation of capacities,

Import of Technology, and

Broad Branding of Products.Eighth Five Year Plan (1992-1997):

The main thrust of the 8th plan was directed towards creating a more competitive environment to improve efficiency in production and a review of public sector enterprises to improve efficiency.In 1991, Industrial trade and Foreign Investment Policies were substantially liberalized. Accordingly 8th plan · gave less importance to ‘quantitative targets. As per the plan, “The desired growth of different sectors will be achieved primarily through modifications in Industrial trade, fiscal policies and changes in duties and taxes rather than through quantitative restrictions on imports/exports or licensing mechanism.”

Government of India, Planning Commission, 8th Five Year Plan, 1992-97 (New Delhi, 1992), Vol, II , p.108.This is clear indication that in the future industrial progress of this country, the private sector is desired to play an increasingly important role. Production contributed by the industrial sector registered an annual average growth rate of S.l % as against the target of 7.5%.Ninth Five Year Plan (1997-2002):

The 9th plan kept a target of 8.2% per annum growth in the Industrial production. But the actual achievement is nowhere near the target. Because of various factors such as lack of domestic demand for intermediate goods, high oil prices, existence of excess capacity in some sectors, Business cycle, Infrastructure constraints particularly Power, Road and Transport and subdued capital market, the Industrial Production could not pick up much. The growth rates for 1997-98, 1999-2000, 2000-01 and 2001-02 were just 6.7%, 6.7%, 5.0% and 2.7% respectively.2001-02 and 2002-03- The year 2001-02, was characterised by a slowdown in world output. India also witnessed a weak industrial growth of 2.7% during 2001-02, as measured by the UP. The slowdown was broad-based and took place across most industry groups with particularly weak growth of only 1.2% in mining and quarrying.Tenth Five Year Plan (2002-07):

In 10th Plan, there was an acceleration in the industrial growth rate.Eleventh Five Year Plan (2007-12):

During Eleventh Five Year Plan targeted growth of industrial production is set at 10 percent per annum and manufacturing sector growth target is set at 12 percent per annum. However, in the wake of global recession, the government is contemplating a moderation in these rates.

12. TWELFTH FIVE YEAR PLAN (2012-17):

During twelfth Five Year Plan targeted growth of industrial production is again set at 10 percent per annum. However, in the wake of global recession, the government is aware about a moderate rate of growth.

ROLE OF SECONDARY SECTOR

General Role of Industrial Development in Economic Growth

The following points explain the role of industrial development in economic growth:

1. Modernisation of Industry:

Industrial development is necessary for modernisation of agriculture. In India, agriculture is traditional and backward. The cost of production is high and productivity is low. We need tractors, threshers, pump sets and harvesters to modernise agriculture. To increase productivity, we need chemical fertilizers, pesticides and weedicides etc. These are all industrial products. Without industrial development, these goods cannot be produced. Agricultural products like jute, cotton, sugarcane etc. are raw materials. To prepare finished products like flex, textiles and sugar etc. we need industrialisation. So industrial development is necessary for modernisation of agriculture.

2. Development of Science and Technology:

Role of Micro, Small and Medium Enterprises

Role of large scale industries

General Role of Industrial Sector

Year Annual growth rate

2012-13 2.7%2013-14 5.0%2014-15 5.7%2015-16 7.3%

2016-17 5.2%

Industrial development encourages the development of science and technology. The industrial enterprises conduct research and develop new products. Ethanol in the form of biofuel is an example of industrial development. Industry conducts research on its wastes and develops byproducts like biodiesel from Jatropha seeds. Due to industrialisation, we have made progress in atomic science, satellite communication and missiles etc.

3. Capital Formation:

Acute deficiency of capital is the main problem of Indian economy. In agricultural sector, the surplus is small. Its mobilisation is also very difficult. In large scale industries, the surplus is very high. By using external and internal economies, industry can get higher profit. These profits can be reinvested for expansion and development. So industrialisation helps in capital formation.

4. Industrialisation and Urbanisation:

Urbanisation succeeds industrialisation. Industrialisation in a particular region brings growth of transport and communication. Schools, colleges, technical institutions, banking and health facilities are established near industrial base. Rourkela was dense forest but now is ultra modern town in Orissa. Many ancillary units have been established after setting up of big industry.

5. Self-reliance in Defence Production:

To achieve self-reliance in defence production, industrialisation is necessary. During war and emergency dependence on foreign countries for war weapons may prove fatal. Self-reliance in capital goods and industrial infra-structure is also necessary. Atomic explosion at Pokhran (Rajasthan) and Agni Missile are examples of industrial growth.

6. Importance in International Trade:

Industrialisation plays an important role in the promotion of trade. The advanced nations gain in trade than countries who are industrially backward. The underdeveloped countries export primary products and import industrial products. Agricultural products command lower prices and their demand is generally elastic. While industrial products command

higher values & their demand is inelastic. This causes trade gap. To meet the deficit in balance of payments we have to produce import substitute products or go for export promotion through industrial development.

7. Use of Natural Resources:

It is a common saying that India is a rich country inhabited by the poor. It implies that India is rich in natural resources but due to lack of capital and technology, these resources have not been tapped. Resources should be properly utilized to transform them into finished industrial products. The British people took India’s cheap raw-materials for producing industrial goods in their country. India was used as a market for their industrial products. So India fought with poverty and England gained during industrial revolution. Hence industrialisation plays important role for proper utilisation of resources.

8. Alleviation of Poverty and Unemployment:

Poverty and unemployment can be eradicated quickly through rapid industrialisation. It has occurred in industrially advanced countries like Japan. The slow growth of industrial sector is responsible for widespread poverty and mass unemployment. So with fast growth of industrial sector, surplus labour from villages can be put into use in industry.

9. Main Sector of Economic Development:

Industry is viewed as leading sector to economic development. We can have economies of scale by applying advanced technology and division of labour and scientific management. So production and employment will increase rapidly. This will bring economic growth and capital formation.

10. Fast Growth of National and Per Capita Income:

Industrial development helps in the rapid growth of national and per capita income. The history of economic development of advanced countries shows that there is a close relation between the level of industrial development and the level of national and per capita income. For instance, the share of industrial sector to national income was 66% , whereas the share of agriculture in the same year was only 14.2%.

11. Sign of Higher Standard of Living and Social Change:

A country cannot produce goods and services of high quality in order to attain decent living standard without the progress of industrial sector.

Contribution of Secondary Sector in Indian Economy

Manufacturing has emerged as one of the high growth sectors in India. Industry accounts for 26% of GDP and employs 22% of the total workforce.

According to the World Bank, India's industrial manufacturing GDP output in 2015 was 6th largest in the world on current US dollar basis ($559 billion), and 9th largest on the inflation adjusted constant 2005 US dollar basis ($197.1 billion).

Prime Minister of India, Mr Narendra Modi, had launched the ‘Make in India’ program to place India on the world map as a manufacturing hub and give global recognition to the Indian economy.

India’s manufacturing sector has the potential to touch US$ 1 trillion by 2025. There is potential for the sector to account for 25-30 percent of the country’s GDP and create up to 90 million domestic jobs by 2025.

Role of MSME:

No. of units:

It is estimated that the Total SSI sector comprises 1,05,21,190 units in March 2017, spreading over the length and breadth of the country. About 55 % of these units were located in rural India. Over 44 lakhs (42.26 %) in the total SSI sector were SSIs and the remaining 61 lakhs (57.74 %) were SSSBEs. The no. of ancillary units among SSIs was 2.98 %. The dominating presence of tiny units with original investment in plant & machinery up to Rs.25 lakhs has been a continuous feature in the SSI sector. In the Third Census, it was found that 99.5 % of the SSIs were tiny units. It was estimated that the total SSI sector comprises 44,45,868 SSIs (42.26%) and 60,75,322 SSSBEs (57.74%). The number of ancillary units among SSIs was estimated to be 1,32,313 (2.98%). About 44% of the units were in the Services Sector, followed by 40% units engaged in manufacturing and

allied activities and 16% units in repairing and maintenance activities. Hence, Services sector emerged as the dominant component in the Total SSI Sector in the Third Census. 

Source: http://www.dcmsme.gov.in/ssiindia/census/ch6.htm

Employment generation:

SSI are labor intensive and employment generation has increased from 39.7 lakh in 1973-74 to 4.67 crore in 2012-13 and 6,49,32,763 persons during the reference period. The five States, viz., Uttar Pradesh (16.05%), West Bengal (8.7%), Andhra Pradesh (8.58%), Maharashtra (8.23%), Tamil Nadu (8.09%) put together had a share of 49.65% in the total employment. 

Output:

Total production of SSI unit has increased from 7200 crore in 1973-74 to 117908 billion in 2011-12 and their growth rate has increased to 8.1%.The gross output in the total SSI Sector is estimated rose to be Rs.2,82,26 Billion in 2017.

Contribution to export:

The share of export has increased from 9.6% in 1971-72 to 42.6% in 2012-13 and by the end of 12 five year plan it is expected to increase upto 50%.

Equitable distribution of income:

Due to the fact that ownership of these industries is wide spread as compared to large scale industries.

Regional balance of industries:

they are playing imp role in dispersing the industrial units in various parts of the country.

IMPORTANCE OF SECONDARY SECTOR:

Balanced Economy:

Indian economy is unbalanced due to major dependence on agriculture in which uncertainty element is present.Industrialisation helps to balance the economy.

Increase in wealth:

It is because:

a)natural resources are properly utilized

b)development of industries help to develop trade , banking , transport.

c)Per capita production in industries is more than in agriculture.

Increase in employment:

industrialization means setting of more industrial unit resulting to more employment opportunities.

Increase in standard of living:

development of industries means demand for labors leading to increase in wages.as a result they are able to lead a better life.

More capital formation:

it depends on saving and investment. Income of people increases due to industrialization leading to more savings and investment.

Increase in national income:

proper exploitation of natural resources increase production, trade , national income.

Low cost of good:

industrialization leads to more production of goods at low cost. The same are sold at cheap rate and consumers get more satisfaction.

Increase in government income:

large scale industries contribute to the government in the form of tax.

Import substitution:

industrialization helps to produce those goods which were earlier imported.

Self dependence:

industrialization helps to produce those goods sufficient in quantity and help to save foreign reserve which resulted in self dependence of the nation in many sectors.

Export promotion:

by producing good quality goods industrial sector export its products to other countries.

National defence :

industries like iron and steel, chemicals, war equipment factories are of great significance to the defence of the country.

Supporting to agriculture:

provide agriculture tools, equipment's, inputs like fertilizers, chemicals, etc. Industries also played imp role in attaining success in respect of green revolution.

PROBLEMS FACED BY INDIAN INDUSTRIES

1. Shortage of raw material:it leads to import of raw material at high cost resulting to increase in cost of production.

2. Poverty :Poverty is a root cause of low savings, least propensity to consume, low capital formatio thus low investment in industries.

3. Lack of efficient management – India lacks in efficient managers and industrialist.

4. Lack of skilled workers:most of labourers are agriculture farmers. they come to cities in slack season in search of odd jobs and make no effort to get industrial training leading to poor production quality.

5. Poor performance of agriculture sector:

Industrial sector depends on agriculture for raw material .so poor performance of agriculture sector stagnant the growth of industrial sector.

6. Poor performance of public sector: PSU are incurring huge losses due to faulty policies and lack of proper mgmt. which fail to generate surpluses

7. Lack of credit facilities:Industries are still not getting benefits of credit facilities at low rate of interest.

GOVE RNMENT INITIATIVES:

Government Policies for Development and Promotion of Small-Scale Industries in India:

1. Industrial Policy Resolution (IPR) 1948:

The IPR, 1948 for the first time, accepted the importance of small-scale industries in the overall industrial development of the country.

It was well realized that small-scale industries are particularly suited for the utilization of local resources and for creation of employment opportunities. However, they have to face acute problems of raw materials, capital, skilled labour, marketing, etc. since a long period of time. The main thrust of IPR 1948, as far as small-scale enterprises were concerned, was ‘protection.’

2. Industrial Policy Resolution (IPR) 1956:

The IPR 1956 for small-scale industries aimed at “Protection plus, Development”. In the Third Five Year Plan period 1961-66, specific developmental projects like ‘Rural Industries Projects’ and ‘Industrial Estates Projects’ were started to strengthen the small-scale sector in the country..” 

For micro , small scale & medium enterprises

For large scale industries

3. Industrial Policy Resolution (IPR) 1977:

The main thrust of the new industrial policy was on effective

promotion of cottage and small-scale. IPR1977 accordingly classified small sector into three broad categories:

1. Cottage and Household Industries:

Cottage and Household Industries which provide self-employment on a large scale and known as employment industry.

2. Tiny sector:

Tiny sector incorporating investment in industrial units in plant and machinery up to Rs. 1 lakh and situated in towns with a population of less than 50,000 according to 1971 Census.

3. Small-scale industries:

Small-scale industries comprising of industrial units with an investment of upto Rs. 10 lakhs and in case of ancillary units with an investment up to Rs. 15 lakhs.

As per this resolution, the small sector was, thus, to be ‘protected, developed, and promoted.’

Industrial Policy Resolution (IPR) 1980:

As to the small sector, the resolution envisaged:

(i) Increase in investment ceilings from Rs. 1 lakh to Rs. 2 lakhs in case of tiny units, from Rs. 10 lakhs to Rs. 20 lakhs in case of small-scale units and from Rs. 15 lakhs to Rs. 25 lakhs in case of ancillaries.

(ii) Promotion of village and rural industries to generate economic viability in the villages well compatible with the environment.

Industrial Policy Resolution (IPR) 1990:

The important elements included in the resolution to boost the development of small-scale sector were as follows:

(i) The investment ceiling in plant and machinery for small-scale industries (fixed in 1985) was raised from Rs. 35 lakhs to Rs. 60 lakhs and correspondingly, for ancillary units from Rs. 45 lakhs to Rs. 75 lakhs.

(ii) Investment ceiling for tiny units had been increased from Rs. 2 lakhs to Rs. 5 lakhs provided the unit is located in an area having a population of 50,000 as per 1981 Census.

(iii) As many as 836 items were reserved for exclusive manufacture in small- scale sector.

(iv) With a view, to improve the competitiveness of the products manufactured in the small-scale sector; programmes of technology up gradation will be implemented under the umbrella of an apex Technology Development Centre in Small Industries Development Organisation (SIDO).

(v) To ensure both adequate and timely flow of credit facilities for the small- scale industries, a new apex bank known as ‘Small Industries Development Bank of India (SIDBI)’ was established in 1990.

(vi) Greater emphasis on training of women and youth under Entrepreneurship Development Programme (EDP) and to establish a special cell in SIDO for this purpose.

Major initiatives during 11th five year plan taken by government:

• Implementation of Micro, Small and Medium Enterprises Development (MSMED) Act,2006.

• A “Package for Promotion of Micro and Small enterprises was announced in Feb 2007 addressing concerns of credit, infrastructure, technology and support to women entrepreneurs.

• To make credit guarantee scheme more attractive modifications various modifications were done.

• Commerce minister Nirmala Sitharaman has launched the Technology Acquisition and Development Fund (TADF) under the National Manufacturing Policy (NMP) to facilitate acquisition of Clean, Green and Energy Efficient Technologies, by Micro, Small & Medium Enterprises (MSMEs).

Initiatives taken by RECENT government for large scale industries

Make in India is an initiative launched by the Government of India to encourage national, as well as multi-national companies to manufacture their products in India. It was launched by Prime Minister Narendra Modi on 25 September 2014.

The major objective behind the initiative is to focus on job creation and skill enhancement in 25 sectors of the economy. It is expected that increase in volume of investment result in increased production which will lead to higher level of GDP.

Make in India focuses on the following twenty-five sectors of economy.Automobiles, chemicals, textiles, ports, aviation, leather, tourism, auto components, electronics, it, bio-technology, constructions etc.

Thus with the objective of making India a global manufacturing , design and innovation , Make in India concept is based on 4 pillars:

New processes New infrastructure New sectors New mindset

PARDHAN MANTRI MUDRA YOJANA( PMMY):

Modi govt. launched this scheme with aim to provide financial incentives to three different scale industries:

SHISHU YOJANA: Covering loans up to Rs.50000/- to start up small scale unit.

KISHOR YOJANA: Covering loans between Rs.50000/- to Rs. 500000/- start unit.

TARUN YOJANA: Covering loans between Rs.500000/- to Rs. 1000000/- start a unit.

The National Institution for Transforming India (NITI Aayog), after its recent push for Rs 6,000 crore (US$ 889 million) textile sector package.

The Government of India plans to implement a new Defence Procurement Policy (DPP) which was passed in April 2016. The policy has major objective to promote home made defence products. To achieve this objective govt. of India has opened the 25% share for private firms to develop and produce defence products

MAJOR GOVERNMENT INITIATIVES in Industrial Sector:1. NITI AYOG :- Investment In Textile Sector i.e. 6 crore (NATIONAL

INSTITUTION FOR TRANSFORMING INDIA) : in textile sector package , aims to persuade the government for similar support in the manufacturing sector with large scale employment generation opportunities such as electrical & electornics engg. , light manufacturing segments , fotware which also have export potential.

2. DPP (DEFENCE PROCUREMENT POLICY ):- passed in april 2016 under which prority will be given to indigenously made defence products and 25% share will open to private firms.

3. NMP (NATIONAL MANUFACTURING POLICY ): commerce minister nirmala sitha raman has launched technology acquisitoin and development fund (TADF) under the national manufacturing policy (nmpe)to facilitate acquisition of clean , green and energy efficient technologies , by micro , small and medium enterprises(MSME’s).

4. PMMY (PARDHAN MANTRI MUDRA YOJNA ): enterpreneurs of small scale bussiness in india will able to avail loans under PMMY . Shishu These will covering loan upto Rs 50,000, kishor upto Rs 50,000- 0.5 million and tarun upto rs 0.5 million to 1 million.

5. GUJARAT GOVERNMENT :- planning to set up an electronics procucts manufacturing hubs in state through its newly announced electronic policy 2016, which will generate about 5 lakhs jobs in electronic sector in next 5 years.

TERTIARY SECTOR OR SERVICES : The tertiary industry is the segment of the economy that provides services to its customers, this includes a wide range of businesses such as financial institutions, schools and restaurants etc. It is also known as tertiary or service industry. The tertiary industry is one of the three industry types in a developed economy, the other two being the primary or secondary industries. As an economy developed, it shifts its focus from primary to secondary and tertiary industry.

A type of economic activity that is intangible, is not stored and does not result in ownership. A service is consumed at the point of sale. Services are one of the two key components of economics, the other

being goods. Examples of services include the transfer of goods, such as the postal service delivering mail, and the use of expertise or experience, such as a person visiting a doctor. Definition :According to Jim Joseph, “tertiary sector act as an intermediary space between business and government where private energy can be Deployed for public good.”

TYPES OF TERTIARY SECTOR

QUATERNARY ACTIVITIES:Quaternary activities are specialised tertiary activities in the knowledge sector which demands a separate classification. There has been a very high growth in demand for and consumption of information based services from mutual fund managers to tax consultants, software developers.Personnel working in office buildings, elementary schools and university classroom, hospitals and doctor offices, theatres, accounting all belong to this category of services. QUINARY ACTIVITIES: Quinary activities are services that focus on the creation, re-arrangement and interpretation of new and existing ideas, data interpretation and the use and evaluation of new technologies. Often referred to as gold collar professions. It includes highly paid skills of senior business executives, government officials, financial and legal consultants.Nature of activity Type of WorkersPrimary jobs Red collar workersSecondary jobs Blue collar workers Tertiary jobs White collar workers

Quaternary Activities

Quinary Activities

Quinary jobs Gold collar professions

COMPONENTS OF TERTIARY SECTOR1. Economic service2. Social service

ECONOMIC SERVICES:

1. Transport, storage and communication: there are various types of transport, Road transport, water transport, air transport. India railway system is first in Asia and fourth in the world. Communication is a vital service of an economy. It includes postal and telegraph, telecommunication and broadcasting etc.

2.Trade, hotels and tourism: trade services compromises both foreign and domestic trade. Domestic trade means trade between different states and cities with in the country. Foreign trade means trade between different countries. It includes both import and export. However both government and private bodies are equally responsible to increase tourism.

3. Banking and insurance services: in India, banking network is spread all over the country. For the flourishment of other services sector, banking sector plays a very vital role.

SOCIAL SERVICES• Education: general education facilities increasing in good number.

There are sharp increase in the number of primary, middle, high and higher secondary school.

• Health: health services include number of hospital, dispensary, primary health centre, number of doctors, nurses etc. Both public and private sectors are working together to improve the health services in urban and rural parts of India.

• Administration: after independence, the offices of block development offices, district magistrate, Indian administrative service and judicial court have increased to operate smooth functioning of civil services in India.

Service sectors mainly includes (a) Trade

(b) Hotels and restaurants (c) Transport including tourist assistance activities as well as activities

of travel agencies and tour operators (d) Storage and communication (e) Banking and insurance (f) Real estate and ownership of dwellings (g) Business services including accounting; software development; data

processing services; business and management consultancy; architectural, engineering and other technical consultancy; advertisement and other business services

(h) Public administration and defence (i) Other services including education, medical and health, religious and

other community services, legal services, recreation and entertainment services

(j) Personal care services .(k) Services provided by the most sophisticated sectors like

telecommunications, satellite mapping, and computer software. (l) Simple services like those performed by the barber, the carpenter,

and the plumber. (m) Highly capital-intensive activities like civil aviation and shipping. (n) Employment-oriented activities like tourism, real estate, and

housing. (o) Infrastructure-related activities like railways, roadways, and ports IMPORTANCE OF TERTIARY SECTOR:Tertiary sector is having 53.66% share in the GDP (2016- 2017,

economic survey of India 2016). This Sector is very important for development of the country as we do not tax agriculture sector (67% of the population). We get most our taxes from this sector.

1. Helps industrialisation: The development of industries is deponent the performance and improvement of transport, communication, electricity etc. In a country. Transport system help to carry raw materials, finished goods in their required destination.

2. Expands agriculture: tertiary sector helps to develop the agricultural production by providing better network facilities. It helps to carry raw material & finished goods from one place to another.

3. Growth of market: this sector provides different types of services to both agriculture & industrial sectors. Thus it helps to grow the proper market for both agricultural, industrial goods or semi finished goods.

4. Removes regional imbalances: this sector provides a well organised transport & communication service etc. Thus it helps to wipe out the problem of regional imbalances with in the country.

5. Rise in international trade: A well developed service sector like transport, communication etc. helps to expand the international trade

CONTRIBUTION OF TERTIARY SECTOR:• Global standing: with regards to output in the service sector, India

occupies 13th spot in the world.• Employment generation: it employs approx 22% of India work

force.

Yearly growth rate : The territory sector of India has a yearly growth rate of almost 8 per cent per annum and contributed to about 64 percent of India's GDP in FY 2015-16.

• Economic contribution: this set up account for 53.66% of India‘s GDP.

REASONS FOR RAPID GROWTH OF SERVICES:SPLINTERING OR OUTSOURCING: As an economy matures increasing demand for specialisation takes place. Industrial units tend to outsource some activities which were previously undertaken by themselves.

For Example, industrial units may use greater services of specialist subcontractors to provide accounting, research, legal and security services etc.

BHAGWATI (1994) calls this process of specialisation as SPLINTERING.

DEMAND SIDE IMPETUS TO GROWTH:

The share of services in private final consumption expenditure rose significantly due to increased demand for services like education, medical care, health care and health services.

ROLE OF POLICY LIBERALISATION: The post reform period (the period since 1991) has considerably

liberalised the industrial and state policies and opened up banking and insurance, transport and communication to private participation. This has acted as stimulation factor for growth of

industrial sector as well as service sector. SUNIL JAIN and T.N.

NINAN have shown that fast growth in the area of services in post reform period have those that have witnessed significant liberalisation. The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. This scenario is a direct result of Globalization. After 1991, when globalization prominently entered India, service sector experienced a sudden boom.

TECHNOLOGY ADVANCES: Service sector growth can also be stimulated by technological

advances, whereby new activities or products emerge as a result of technological breakthrough.

MUTUAL DEPENDANCE OF INDUSTRY AND SERVICE GROWTH:Gordon and Gupta also find positive impact of industrial growth on service growth. The increasing use of service inputs in manufacturing sector has increased the Total Factor Productivity (TFP) of manufacturing sector.In advanced economies the growth in the primary and secondary sectors are directly dependent on the growth of services like banking, insurance, trade, commerce, entertainment, etc.

SERVICE SECTOR IS THE LIFELINE FOR THE SOCIAL ECONOMIC GROWTH:Service sector is the lifeline for the social economic growth of a country. Service sector is also a major contributor of national income and employment in recent days.GLOBALIZATION IN SERVICE SECTOR :The term globalization means international integration and opening up of world trade, development of advanced means of communication, internationalization of financial markets, growing importance of MNC's, population migrations and more generally increased mobility of persons, goods, capital, data and ideas. The impact of globalisation has been highly positive in almost all spheres of economic and social life and virtually very less negative effect. SERVICE EXPORT :

India has become one of the top five exporters of services amongst developing countries. India’s services is projected to grow at 8.8 per cent in 2016-17, similar to 2015-16. As per World Trade Organisation (WTO) data, India’s commercial services exports increased from US$ 51.9 billion in 2005 to US$ 155.3 billion in 2015, taking its share in global services exports to 3.3 per cent in 2015 from 3.1 per cent in 2014. In terms of growth in tourism sector, during January to December 2016, Foreign Tourist Arrivals (FTAs) were 8.9 million with growth of 10.7 per cent and foreign exchange earnings (FEE) were at US$ 23.1 billion with a growth of 9.8 per cent.

ROLE OF FDI IN SERVICE SECTOR:

FDI can play catalytic role in a growing economy like India. The role of FDI is becoming increasingly significant in the Indian economy. The service sector in India has tremendous growth potential and as a result it attracts huge FDI. The top subsectors attracting FDI inflows include service sector. The Computer Software and Hardware, Insurance and Defence sector enjoy the permission of 100% FDI under automatic route. • The limit of FDI in Telecom sector was increased from 49% to 74%.

FDI GROWTH IN VARIOUS SERVICE SECTORS:

The share of services in FDI inflows increases to 48.4%. If the shares of some other services like Hotels, tourism, trading, information and broadcasting, consultancy services, agricultural services, ports, retail trading etc are included then the total share of cumulative FDI inflows to the service sector would be 58.4%.

INDIA’S GROWTH PATH:India skipped the traditional sequence and the service-sector assumed the role of the lead sector in India’s growth path. In this scenario labour shifting out of agriculture got directly absorbed in services rather than in manufacturing. These labourer got educated and trained to enter the field of services. Mostly skilled and educated labour forces are absorbed in this sector that comes mainly from urban India. In the decade of 2001-2011 the population of urban India grew by 2.76% per annum and its share of total population increased to 31.1 per cent in 2011 from 27.8 per cent in 2001.(Census Report, 2011)ROLE OF SERVICE SECTOR IN INDIAN GDP:

The services sector is not only the dominant sector in  India’s Gross Domestic Product (GDP) but has also attracted significant foreign investment flows, contributed significantly to exports as well as provided large-scale employment. Out of overall services sector, the sub-sector comprising financial services, real estate and professional services contributed 21.6 per cent to the GDP, and grew the fastest among all sub-segments at 10.3 per cent year-on-year in 2015-16.

The sub-sector of trade, hotels, transport, communication and services related to broadcasting contributed 12.6 percent the GDP. The third-largest sub-segment comprising public administration, defence, and other services contributed nearly 12.6 % to the GDP.

SERVICE SECTOR A DRIVEN FORCE OF INDIAN ECONOMY:

The services sector is the key driver of India’s economic growth. The sector contributed around 66.1 per cent of its Gross Value Added growth in 2015-16, thereby becoming an important net foreign exchange earner and the most attractive sector for FDI (Foreign Direct Investment) inflows.

LARGEST SECTOR:

India is the eighth largest services exporter in the world.

PROBLEMS/ LIMITATION OF SERVICE SECTOR

JOBLESS GROWTH:The analysis show that although the service sector has grown at a fast rate during the period of economic reforms (i.e. 1991) ( FROM 43% TO 60%) its share in total employment CONTINUES to remain quite low (FROM 25% TO 27%) over the period. So, India has witnessed jobless service sector growth in post reform periodQUESTIONS RELATING TO SUSTAINABILITY OF SERVICE LED GROWTHServices are hugely important, but they cannot themselves , assure rapid and sustained growth of the Indian economy. Economists like FISHER, CLARK, ROSTOW AND KUZNETS have suggested that development is a 3 stage process : AGRI LED GROWTH, INDUSTRY LED GROWTH AND THEN SERVICE LED GROWTH. But In India, till date first sector is in the process

of development, which resulted in lack of sustainable development. Thus

the sustainability of ‘service- led growth’ is doubtful unless the real (or commodity producing) of agriculture and industry grow fast. Otherwise service led growth cannot be sustained for long.

THE INDIAN GROWTH PARADOX:Indian economy has directly jumped to the third stage without undergoing a rigorous process of industrialization as a result of which the acceleration in growth is largely due to dynamism of service sector while the contribution of industry has tended to stagnate over last 3 decades or so.