Role of different sectors in India – Agriculture – Industry – Services



Role of different sectors in India

Role of Agriculture in India: Agriculture is a very important sector of the Indian economy. It plays a major role in the overall development of the country as it contributes nearly one-fourth of GDP and engages around 60 per cent of the population of the country. Its role is discussed in the following points:

(i) Providing employment (72% at the time of independence, 58% in 2001-02). Even at present more than 53% of working population is engaged in agriculture. However the absoulte number of people engage in Agricultural is very high and therefore the decline in percentage is not a matter of consolation.

(ii) Share in national income (55% in 1950-51 and 17% in 2009-10) and it was 14% (13.9%) in 2013-14 at consant prices. However, the national income of India in 2013 14 is much greater than in 1950-51 and therefore the absoulte contribution of agricultural in national income is very high.

(iii) Supporting industries through providing raw materials and market for industrial consumer and for capital goods.

(iv) Share in foreign trade (12% of total exports and 3% of total imports in 2013-14)

(v) Supplier of food and fodder

(vi) Savings of capital as more output and employment are generated per unit of capital in agricultural sector.

(vii) Contribution to Government’s revenue

(vii) Solving problems of urban congestion and brain drain as development of agriculture has a tendancy stop migration of educated young people and others to the cities in the search of jobs and works

Growth of agriculture during planning period: In the following points we will learn how agricultural sector has developed in India over the years.

Increase in production and productivity: In 1950-51, food grains production was 51 million tonnes which increased to 264.4 million tonnes in 2013-14.

Green revoluation: Significant breakthrough in the production of food grains (often termed as Green Revolution) has been made possible due to the adoption of the new agricultural strategy since 1966 and wide spread use of HYVP-high yielding variety products of seeds. The Green revolution is the result of wide spread use of HYVP-high yielding variety products of seeds as also of expanding irrigation facilities, extensive use of chemical fertilizers, insecticides and pesticides.

Significant breakthrough in the production of food grains (often termed as Green Revolution) has been made possible due to the adoption of the new agricultural strategy since 1966. This strategy stressed upon the use of high-vielding varieties of seeds, proper irrigation facilities, extensive use of fertilizers, pesticides and insecticides often termed as High Yielding Varieties Programmes (HYVP). Since the adoption of this Programme, the production and productivity of food grains especially of wheat have increased sharply. The food grains production increased from 81 million tonnes in the Third Plan (ie before HYVP) to 259 million tonnes in 2011-12.

Similarly, we find the production of pulses increased from 8,4 million tonnes to 19.5million tonnes, of cash crops like sugarcane from 69 million tonnes to 348 million tonnes in 2013-14, of oilseeds from 5.1 million tonnes to 32.4 million tonnes in 2013-14, of cotton from 21 million bales to 36.5 million bales over the period 1950-51 to 2013-14.

HYVP was restricted to five crops-wheat, rice, Bajra, Jawar and maize. But among these, wheat made wide strides with production increased by more than seven times from 11 million tonnes (annual average) in the Third plan to 96 million tonnes in 2011-12. On account of this, it is often said that the green revolution is largely wheat revolution.

The long-term annual growth of food grains output has been around 2.0 per cent during 1960-61 to 2010-11 and the per capita availability of foodgrains has improved from about 395 gm in 1951 to 511 gm in 2013.

Diversification of agriculture: Indian agriculture has become diversified as will be clear from the following fact

The share of non-crop sectors (fishery, fenestry and animal husbandry) in total agricultural output is increasing.

Area under commercial crops like sugat, cotton, seeds, etc. is increasing and that of the food crops is decreasing.

Within food grains, area under superior cereals (rice and wheat) is increasing and area under the inferior cereals is declining

Modernisation of agriculture: Some qualitative changes have taken place in agricultural wtor especially in India since 1966 when Green Revolution was started.

The farmers have started using HYVP-high yindling variety products of seeds which has played an important role in giving the to the green revolution:

The Green revolution in the result of widespread use of WP-high yiedling variety products of seeds as also of expanding irrigation facilities, extensive use of chemical fertilizers, insecticides and pesticides At present the Government wants to initiate the seed green revolution with 4% annual growth rate of agriculture and target of 450 million tonnes of food grains

The farmers have started resorting to intensive cultivation, multiple cropping, and scientific water management.

They have started accepting modern techniques of production.

A number of institutions have been setup for providing agricultural credit, storage facilites, and marketing facilities to the farmers.

The Indian Council of Agricultural Research (ICAR) is the apex body for co-ordinating guiding and managing research and education in agriculture including horticulture. fisheries and animal sciences in the entire country. The ICAR has played a pioneering role in ushering Green Revolution and subsequent developments in agriculture in India through its research and technology development that has enabled the country to increase the production of food grains by 4 times, horticultural crops by 6 times fish by 9 times, milk 6 times and eggs 27 times since 1950-51, thus making a visible impact on the national food and nutritional security.

IV. Improved agrarian system:

The following measures have been taken to improve the economic conditions of the farmers.

In order to stop the exploitation of the actual tillers of the soil and to pass on the ownership of land to them land reforms were introduced after Independence. Three measures were contemplated to achieve these objectives:

(i) Abolition of Intermediaries

(ii) Tenancy reforms

(iii) Reorganisation of agriculture

Legislations were passed in all states to abolish zamindari system. As a result, around 173 million acres of land was acquired from the intermediaries and two crore tenants were brought in direct contact with the state

Under the tenancy reforms, three measures were taken (a) Regulation of rent (b) Security of tenure and (c) Conferment of ownership rights on fenants.

Measures have been taken for Zamindari abolition and Conferment of ownership rights on tenants. It is estimated that 12.42 million tenants have been given ownership of 6.32 million hectares of land. Measures have also been taken for Regulation of rent and Security of tenure where Zamindari abolition is not possible. As far as land ceiling is concerned 2.18 million hectares of land is distributed among 5.58 million beneficieries.

Land consolidation: In order to solve the problem of fragmentation of holdings, the land was reorganized. Accordingly it was decided to consolidate holdings by giving to the farmer one consolidated holding equal to the total of the land in different scattered plots under his possession. Cooperative farming was also started but it did not succeed much.

(v) Other developments: Apart from the above, the following developments have also taken Place.

Agricultural credit: NABARD was set up in 1982 as per the recommendations of Shivraman Committee to refinance the institutions providing agricultural credit to the farmers.

Creation of regulated markets (7157 markets upto March 2010)

Creation of public distribution system

Creation of warehouses

Minimum wages have been fixed for agricultural labourers:

Minimum support prices have been fixed for 24 crops.

Special programmes for poverty removal and employment generation have been undertaken for the rural areas such as Swarnajayanti Gram Swarojgar Yojana and the Mahatma Gandhi National Rural Employment Gurantee Scheme.

Regional Rural Banks- 1975 have been set up to support productive activities in the rural areas.

The government has set up the Food Corporation of India to run the Public Distribution System which provides food to the poor at reasonable prices by purchasing them from the farmers. The price at which the FCI purchases food from the farmers is known as procurement price. It also undertakes the storage of food grains.

Establishment of NAFED (National Agricultural Co-operative Marketing Federation) and TRIFED in August 87 (Tribal Agricultural Co-operative Marketing Federation) to prevent exploitation of tribals.

The National Food Security Mission (NFSM) was launched in 2007-08 in identified districts of different states. The aim is to have self sufficiency in different food crops like rice, wheat and pulses. In order to give special attention to pulses production, an Accelerated Pulses Production Programme (A3P) has been launched as a part of NPSM Pulses

The Rastriya Krishi Vikas Yojana (2000) is being implemented for integrated development of food crops. However at present this Yojana has been merged in Mahatma Gandhi National Rural Employment Gurantee Scheme.

Projects like Forecasting Agricultural Ouptut using Space, Agro-meteorology and Land-based Observations (FASAL) and Extended Range Forecasting System (ERPS) have been started to establish a more scientific and reliable basis for forecasting

Special schemes have been started to improve the production of rubber, coffee, bamboo, poultry, etc

There are various crop insurance schemes which provides financial support to farmers in the event of crop failure as a result of natural calimities

The problems of agricultural sector:

Role of different sectors in India

1. The growth of agricultural sector is not sufficient to satisfy rising consumption and nutritional demand for food of the population. The approach paper to the 12th plan emphasises on achieving 4% average annual growth rate for the 12th Plan.

2. The production of wheat and rice is rising at a faster rate than that of coarse grains. like Maize, lawat, etc.

3. The productivity of agriculture in India is much lower compared to the agriculture in the developed countries

4. There are regional imbalances in the spread of green revoluation.

5. The non crop activities like cattle breeding, Fisheries and Forestry are not given much importance

Not so modern agricultural sector:

Role of different sectors in India

(a) The HYVP was initiated or a small area of 189 million hectares in 1966-67 and even in 2003-04 only 80 million hectare of land was covered by this program which is just 44 per cent of the gross cropped area. Naturally, the benefits of the new technology have remained confined to this area only.

(b) In many areas and in a number of crops old methods of ploughing, sowing abil harvesting etc. are still used. As a result, productivity in such areas and crops is very low.

(e) About 55 percent net cropped areas rain fed and there are no appropriate dry-farming, techniques (In order to address the problems faced by farmers of rain fed areas especially small and marginal farmers, Rainted Area Development Programme was launched.)

(d) Only 45 per cent of the net cropped area has irrigation facilities. The irrigation sector requires a renewed thrust both in terms of investment as also modern management.

(e) The current level of farm mechanization at 25 percent is very low as compared to about 90 percent in developed countreis.

Flaws (defects) in land reforms:

Role of different sectors in India

1. Many states have not taken effective steps for implementing land reforms

2. Many loopholes have been deliberately left in the land reform legislations

3 Many Zamindars have taken away land from the tenants under the pretex of personal cultivation

4. The poor tenants have not been able to benefit from the land reforms against socially. politically, and economically powerful Zamindars

Problems related to finance:

Role of different sectors in India

In 1951 money lenders provided 71.6% of rural credit by charging exorbitant interest ranging between 18% to 50% per year.

2. The Government has nationalised in all 20 banks (actually 19) to provide agricultural credit to the farmers at reasonable rate of interest

3 Regional Rural Banks have been set up except in Sikkim and Goa (1975) to meet the credit requirement of farmers, rural traders, and artisans. These banks were set up as per the recommendations of Saraiya Commission (Banking commission). At present there number is 196. (Since 2005 process of amalgamation has been initiated and so at present there are 46 amalgamated and 36 stanul alone, thus total 82 RRBs


National Bank for Agricultural and Rural Development has been set up (1982) provide short term and long term credit to the farmers

5. During 2001 09 the flow of credit to the farmers has increased by more than 3 times due to “Farm Credit Package” introduced in 2001.

6. Kishan Credit Card Scheme was started in 1998 (later on revised in 2012) analer which more than 800 lakh credit cards have been given to the farmers, to help them to get bank credit for cultivation needs

7. From time to time, the government announces agricultural debt waiver and debt relief schemes so as to mitigate the distress amongst farmers

Problems relating marketing and warehousing:

Role of different sectors in India

(a) The storage facilities with the individual farmers are normally very primitive types in the form of dog holes and pits. As a result 10-15 percent of agriculture produce gets spoiled or eaten by rals Government agencies like Foost Corporation of India provide storage facilities but these are inadequate (b) There is a lack of organization among farmers so they do not get a fair price from the purchasers who are generally well-organized.

(c) There are a number of agents between the producers (farmers) and the consumers (buyers). They change a heavy amount as their fees or as commission. As a result, the farmers do not get a fair share in the total product price charged.

(d) Because of heavy indebtedness, the farmers are many times forced to sell their produces at low prices and sometimes due to lack of proper transport facilities in the nearest market at not so great prices

(e) A great number of farmers live just for subsistence. Their marketable surplus is very low or almost nil

(f) Several malpractices exist in unorganized agricultural markets such as under weighing levying of a number of unauthorised fees and taxes etc.

(g) The farmers are many a times not well informed about the prevailing market conditions including prices prevailing in the markets

(h) Grading and standardisation are at a very low level So often inferior quality gets mixed up with superior one, killing the motivation of farmers to produce superior quality products.

(i) In order to meet the needs of poor people in the country, the government runs a network of ration shops and fair price shops which provide food grains and other essential commodities at very low prices to consumers. But it has been seen that these ration shops have catered to the needs of all and sundry. Despite the massive coverage of these shops, the total requirements of food grains of all vulnerable sectors are not met.

There is a need to develop marketing infrastructure, storage, warehousing, cold chains and spot markets that are driven by modem technology. In this direction some steps have been recently taken. These include:

  • To bring about reforms in agricultural marketing, Agricultural Produce Market Committee (APMC) Act is being amended by various states At present there are 7157 regulated markets in the conuntry.

  • To transfer agricultural technologies and information to the farming sector a number of initiatives have been taken by the Department of Agriculture & Cooperation. These include, setting up of Agri Clinics and Agri Business Centres (ACABC), setting up of Kisan Call Centres and developing of Kisan Knowledge Management System (KKMS) etc.

  • The food corporation of India is the nodal agency for procurring, distributing and storing food grains which takes measures for better managment for food.

  • The National Policy for Farmers, 2007 is being adopted by the government. Major policy provisions include provisions for assets reforms, water use efficiency, use of technology, inputs and services, good quality seeds, disease free planting material. credit insurance etc.


Role of different sectors in India

Role of industry in India: In any economy, industries have an important role to play. In fact, it has been noticed that countries which are industrially well developed (example USA) have higher per capita income than those countries where industries are not well developed (example: India. Pakistan). The only exception to this could be the petroleum exporting countries (like UAE) which have a higher per capita income due to abundance of petroleum products and virtual monopoly in export of petroleum products. In India, industrial sector plays the following role:

(i) Modernizing agriculture through supplying agricultural equipment, fertilizers, insecticides, etc.

(ii) Providing employment. At present only 24.3% (2011-12) of labour force is provided employment by the industry. However, this is a very small percentage. Unless the industrial sector produces more employment opportunities, the unemployment problem in India cannot be solved.

(iii) Share in the GDP: Over the years, the value-added by industrial sector in the GDP has improved from 16.6 percent in 1950-51 to 26% per cent in 2013-14.

(iv) Contribution to exports: Indian industries contribute tremendously to the export earnings of India. In fact, manufactured goods alone contribute around 66 per cent (more than 2/3rd) of exports earnings of India.

(v) Raising incomes of the people: Industries generally help in raising the incomes of the people of a country. This is because the productivity of labour is very high in industry compared with the agriculture. In the industrial countries the level of per capita income is much higher than in the agricultural economies. For example, per capita income in USA in 2011 was 48620 dollars as against 1420 dollars in India.

(vi) Enhancing further the economic growth: As industrialization grows, the role of capital goods vis-a-vis consumer goods gains strength. This helps in enhancing further the economic growth. It helps an economy to attain self-sustaining growth.

(vii) Meeting high-income demands: Beyond certain limits the demand of the people for agricultural products falls and for industrial products rises. Industries help in meeting these ever-increasing demands.

(viii) Strengthening the economy:

  • providing consumer goods in large quantities at low prices

  • providing support to agriculture

  • providing defence goods

  • providing infrastructure

Growth of industrial sector in India: All the industries of a country can be grouped in two major ways (1) on the basis of the size of industries and (ii) on the basis of end-use.

(i) On the basis of size of industries On the basis of size of the industries, they can be divided into large industries, medium industries and small industries. Large industries which largely form the basis of the country’s index of industrial production include the following industries: (a) mining and quarrying (often referred as mining); (b) manufacturing; and (c) electricity, gas and water supply (often referred as electricity)

(ii) On the basis of end-use On the basis of end-use of output, industries are divided into

(a) Basic goods industries (like minerals, fertilizers, cement, iron and steel, non-ferrous basic metals, electricity etc.)

(b) Capital goods industries (like machinery, machine tools, rail-road equipments etc)

(c) Intermediate goods (like chemicals, rubber, plastic, coal and petroleum products)

(d) Consumer goods-consumer durables and non durables (like man-made fibers. beverages, watches, cosmetics, perfumes etc.).

The long-term average annual growth rate of industries comprising mining, manufacturing electricity and construction during the post reform period between 1991-92 and 2011-12, averaged 7 per cent as against GDP growth rate of 6.9 per cent.

Pattern of Industrial Development since Independence: Here we will make a comprehensive review of the pattern of industrial development during the planning era since 1951

The progress of industrialization in last five and a hall decades has been striking. There has been a remarkable development of capital goods industries, diversification and broad basing of manufactured products, phenomenal development of small scale industries. An impressive base has been created in sophisticated and high technology industrial sectors like electronics, machine tools, telecommunication equipment and the like.

Fluctuating industrial output:

Role of different sectors in India

  • In the first 3 plans the average growth rate of industrial production was 8%

  • During 1980-91 the average industrial growth rate was 7.8%

  • During 1990-91 to 1992-2000 the average industrial growth rate was 5.7% During 1951 to 2005-06 the average industrial growth rate per year has been 6.2% against the target of 8%

  • The target of the 10th plan for industrial growth was 10% per year, (actual 8.7%)

  • The target of the 11th plan for industrial growth was also 10% per year (actual 7.4%)

  • The target of the 12th plan was 9.6% per year. In 2012-13 the growth rate of industries was only 1%.

  • In 2013-14 the growth rate of industries was only 0.4%

Industrial deceleration-slowdown

Role of different sectors in India

In the period 1965-80 not only there was a deceleration in the industrial growth but the industrial structure also witnessed the phenomenon of retrogression. In other word, the growth of elite-oriented consumption goods such as man-made fibers, beverages, perfumes, cosmetics, watches, clocks, etc. was considerably higher than the goods which satisfied the needs of mass of the people such as coal, cotton, railways, etc.

The various reasons behind the process of deceleration and retrogression are:

(a) Unsatisfactory performance of agriculture.

(b) Slackening of real investment especially in public sector

(c) Slow-down in import substitution

(d) Regulation and control over private sector in the form of industrial licensing MRTP Act, high taxation, price and distribution controls, foreign exchange control etc.

(e) Narrow market for industrial goods, especially in rural areas

(2) Growth of basic and capital goods industries: The structure of industry has shifted in favour of basic and capital goods and intermediate goods sector during the period of planning since 1951. The programme of industrialization was started on a massive scale in the Second Plan (1956-61) Based on the Mahalanobis model, this Plan emphasized on building basic and capital goods industries so that a strong base for development in future could be made. Three Steel Plants were set up in the public sector at Bhilai, Rourkela and Durgapur. Public Sector made advances in machine building, machine tools, railway locomotives, heavy electrical, ship building, fertilizers etc.

(3) Remarkable growth of consumers goods industries As mentioned in point 1 there has been significant growth of elite-oriented consumption goods such as man-made fibers, beverages, perfumes, cosmetics, watches, clocks, etc. was considerably higher than the goods which satisfied the needs of mass of the people such as coal, cotton, railways, etc.

(4) Modernisation of industrial sector: Industrial sector has become broad-based and modernised. We now manufacture a wide varieties of goods like food products, leather products, chemicals products, rubber and plastic products, metal products, machinery. transport equipment, paper products, wood products and so on. The broad progress of mining, manufacturing and electricity industries.

(5) Growth of public sector On the of the First Plan, the number of central public sector units. was just 5 with a total capital of about 30 crores. In March 2013, the number of public sector central units increased to 277 with total capital investment of 8,50,000. However, only 220 public sector units were in operation out of which 158 were making profit and 68 incurred losses Several public sector giants like ONGC, Indian Oil Corporation, Steel Authority of India, Bharat Heavy Electricals, HMT, HAL BEL. Cement Corporation of India, Coal India and NTPC dominate the Indian industrial scene,

Out of 277 CPSES (Central Public Sector Enterprises) in 2012-13, 229 were in operation out of which 149 earned profits and 79 made losses.

(6) Growth of monopolies in private sector: So far as the private sector is concerned, the dominance of large and monopoly business houses has increased several times. The aggregate assets of the big business houses like Tatas, Birlas, Bajajs, Reliance, Goenka, etc. (in all 80) amounted to 10,00,000 crore in 2008 against 50,000 crore in 1990-91

(7) Infrastructure: A remarkable expansion and sophistication took place in infrastructure facilities since 1951, in such respects as power generation, development of energy sources, railway transport, telecommunication, roads and road transport and the like, which are basic pre requisites for industrial development. Moreover, various financial institutions as well as Refineries, Ports, Power units, Storage capacities, and Power grids have also been set up. India has a respectable place in space research, nuclear technology, and communication technology.

(8) Progress in science and technology: The country could be proud of achieving remarkable progress on the science and technology front. An elite cadre of scientific, technical and professional main power has been built.

(9) Tremendous growth of small industries: One of the notable features of the planning era since 1951 has been the mammoth growth of small scale industrial units which have an important place in our economy.

Small industries in India.

Role of different sectors in India

  • SME means Small and Medium Enterprises

  • According to Micro, Small and Medium Enterprises Development Act, 2006 The manufacturing units with investment of 25 lakh are known as micro enterprises.

  • (For service sector this limit is 10 lakh)

  • The manufacturing units with investment of 25 lakh to 5 crore are known as small enterprises (For service sector this limit is 10 lakh to 2 crore)

  • The manufacturing units with investment of 75 crore to 10 crore are known as medium enterprises. (For service sector this limit is 2 crore to 5 crore)

The small industries

Role of different sectors in India

(a) contributed about 45% of Gross Output Value in the manufacturing sector.

(b) Employed nearly 100 million people in 2011-12. It is next to only agriculture in providing employment.

(c) Contribute about 40% of total exports

(d) The number of small, medium and micro units both registered and unregistered was around 16000 in 1950 which went up to 45 million in 2011-12. Moreover,

(e) The encouragement of MSMEs with their favourable employment-capital ratio has become a stabilizing force in the Indian economy. According to All India Census of Small Scale Industries, 2001-02, employment generated by the small scale sector per Rs. 1 lakh investment was 1.39 as against only 0.20 in respect of the large manufacturing units. In other words, an investment of Rs.10 lakh generated employment for 21 persons in small scale sector and for 2 persons in large scale sector.

As far as the investment-output ratio is concerned, the small scale industries sector is almost at par with the large scale industries. It is estimated that they need slightly higher amount of investment (Rs. 48.000) for producing the same output (worth Rs. 1 Lakh) than their larger counterparts (Rs.43,000).

(f) They are helpful in promoting more equitable distribution of income.

(g) They are helpful in promoting a balanced regional development

(h) They promote exports but require very little foreign exchange for raw materials and technology.

(i) They promote a better use of latent resources of the country

(j) They conserve the cultural heritage of the country by promoting cottage industries.

(k) Auxilliary units produce spare parts and components for large industry.

(l) They help in controlling inflation by producing consumers goods on mass scale.

Problems of Industrial Development in India.

Role of different sectors in India

Failure to achieve targets During the period 1951 to 2011-12 the average industrial growth rate was 6.2% against the target of 8% per year

Under-utilization of capacity: A large number of industries experience endemic under utilization of production capacity. The magnitude of under-utilisation varies from 20% to 60% in different industrial sectors, the average under-utilisation being in the legion of 40% to 50%

The factors responsible for under-utilization of capacity are said to be: (a) indiscriminate grabbing and creation of capacities by private enterprise (b) demand short-falls (c) over optimistic demand projections (d) supply bottlenecks, (e) labour problems and (f) deliberate under utilization to create shortages and thereby to corner more profits.

(3)Absence of world class infrastructure: The lack of transport facilities, poor conditions of road, power shortages and power failures are responsable for slow industiral development in India.

(4) Capital-output ratio (ICOR- Incremental Capital Output Ratio): This ratio shows the relationship between investment and output. It was 2.95 during the first plan increased to 3.9 during the 7th Plan and further to around 4 during 9th,10th & 11th Plan. The increasing capital ratio is due to highly capital intensive nature of basic and heavy units, under-utilisation of capacity, unremunerative administered prices in respect of basic goods and services and so on.

(5) High cost industrial economy: The costs and prices of manufactured goods and services in India are generally much higher than international costs and prices. The consuming public is obliged to bear high burden. The high cost economy is attributed to import substitution. government protection to indigenous industries, monopolistic tendencies in several industrial areas, high wage rates, increasing capital intensity in industrial units, outdated technology low productivity of labour, uneconomic size of industrial units, lack of cost consciousness among industrial magnates and managers and so on

(6) Inadequate employment generation: One of the most serious deficiencies of industrial development over the decades since Independence has been its inadequate employment generation in relation to investment made. The process of industrialisation has failed to make a marked dent on the unemployment problem in India. Factory employment absorbed only 2% of the labour force in 1980. There was only a marginal increase in the rate in 1980s. Employment generation through industrialisation has also been decreasing over the decades.

(7)Poor performance of public sector: Though public sector has grown by leaps and bounds

over the planning period backed by massive public investment, its performance on production and profit fronts has been generally disappointing. Though profit may not always be the appropriate criterion for evaluating the performance of public sector industrial units, its relevance cannot be ignored altogether Commercial and economic efficiency is to a large extent reflected in profit. A loss making undertaking becomes weakened in course of time. It loses dynamism and survival capability. A large number of public sector units are loss leaders in the industrial sphere while the rate of profitability of others is low. The net losses of central public sector units (79 units) stood at more than Rs. 28,000 crore in 2012-13 compared to Rs.14,600 crores in 2008-09

(8) Sectoral imbalances: Industrial development requires that there should be proper fine

tuning of all sectors so that they reinforce each other. In India, industrial development on an over-all basis suffered severe set-backs because of inadequate support from agriculture and infrastructure. Thus, there is sectoral imbalance in the industrial growth.

(9) Regional imbalances: Industrial development continues to be lopsided, region-wise Large scale industries are concentrated in a very few states like Maharashtra, Andhra Pradesh, Tamilnadu and Gujarat. These four States account for 50% of total factories and 50% of productive capital.

(10) Industrial sickness: In March 2013 there were 25 Lac sick units (90% of the total sick units) were small units. Industrial sickness has been spreading over the years The causes of sickness are identified as financial mismanagement, demand recession, labour unrest working capital shortage, cost escalations, shortage of raw materials, uneconomic size, out-dated machinery and and so on.


Role of different sectors in India

The service sector or tertiary sector of an economy involves provision of services to other business enterprises as well as to final consumers. Service sector includes:

» Business and professional services Accounting, Advertising. Architectural and Engineering, Computer and related services and Legal services.

» Communication services – Audio-visual services, Postal and Courier services, Telecommunications

»  Constraction and related services.

» Distributive services

» Education services.

» Energy services.

» Environmental services

» Health and social services:

» Tourism services

» Transport services Air transport services, Maritime services, services auxiliary to all modes of transport.

Role of service sector in India: The service sector in India is its largest sector and accounts for significant share of GDP. This sector is growing very fast. It is playing an important role in the development of the economy as would be clear from the following points:

(1) Increasing share in the GDP: Over the planning period, the share of tertiary or services sector has increased from about one third of GDP in 1950-51 to 60% (59%) in 2013-14.

(2) Providing employment: Service sector occupied about 17.3 per cent of working population in 1951. In 2011-12 this proportion was 27%.

(3) Providing support to other sectors: Service sector provides support to agriculture and industries by providing a number of services in the form of financial services, transport services, storage services, distributive services, software and communication services and so on.

(4) Contribution to Exports: Services exports from India comprise services such as travel, transportation, insurance, communication, construction, financial services, software, agency services, royalties, copyright and licence fees and management services.

Services accounted for about 1/3rd of total exports in India (2012-13) This is 3.3% of the total exports of services in the world.

(5) India has the 3rd largest technical and scientific man power in the world.

Growth of service sector in India: Role of different sectors in India

1 The share of the service sector in GDP was 55.7% in 2011-12

2. It has over taken the growth in the agricultural and industrial sector

3. The Growth of service sector in the 8th plan, was 7.54%, 81% in the 9th plan and 94% in the 10th plan

4. The 11th plan has target of achieving 9.4% annual growth rate for the service sector. However, the actual growth rate of the service sector has been around 10% per year.

5. The services like trade, hotels, transport, communication, financial services. community and social services, education, entertainment etc. have rapidly developed

6. The information technology services providing BPO (Business Process Outsourcing services) have grown at the rate of 60% to 70% in the recent past

Why has the service sector grown in India? Role of different sectors in India

  • The income elasticity of demand for services is very high and therefore with the rising national income the service sector has expanded rapidly

  • Technical and structural changes in the economy have made it possible to outsource services which were previously produced by the industry sector inhouse.

  • with the advancement of information technology it has become possible to deliver services over long distances at reasonable price

  • after liberalization of financial sector the demand for services has increased.

  • Moreover reforms in various infrastuctural activities have also contributed to the growth of the service.

Problems of service sector in India:

Although service sector is doing remarkably well, it is facing lots of problems among which important ones are:

(1) Poor infrastructure (power shortage and Traffic congestion in large cities)

(2) Inadequate economic reforms (in the financial sector)

(3) Though the service sector contributes 55.7% of GDP it provides only 25% of total employment.

(4) Need to attract foreign tourists who can contribute a great to foreign exchange income.

(5) Poor services (transport, hotels, etc.)

(6) Poor transport (airports, railways are not well organised)

(7) Improper consular division (a great delay in issuing VISAs)

(8) Problems faced by service trade (no export promotion measures for services)

(9) Poor communication (lack of personal computers and internet services has not allowed the E-commerce to develop on a desire scale)

(10) Requires support of other sectors

(11) Severe competition from other countries (particularly in BPO services from China, Vietnam and Phillipines)

Role of different sectors in India

Role of different sectors in India

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External Debt of India

Balance of Payment

Law of Agency

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