Sectors of Indian Economy

Government of India classifies sectors of Indian economy into 3 broad categories and which in turn further divided into 8 sub-categories for inclusiveness in growth. The 3 broad categories are Agriculture and Allied sector, Industries sector and Services Sector. Agriculture and Allied sector includes Agriculture, Livestock, Forestry and Fishing; Industries sector includes Mining and Quarrying; Manufacturing; Electricity, Gas and Water Supply and other Utility Services; Construction; Services sector includes Trade, Hotels, Transport, Communication and Services related to Broadcasting; Financial, Real Estate and Professional Services; Public Administration, Defence and Other Services.

Primary, Secondary and Tertiary Sectors of Indian Economy

Other way of classifying Indian economy is to divide it into Primary, Secondary and Tertiary sectors.

The Primary sector includes activities involving the natural resources like its extraction and production of goods and services using natural resources, etc. Agriculture sector and Mining and Quarrying come under Primary Sector.

The Secondary sector includes processing of natural resources produced from the Primary sector and convert them into finished products. Manufacturing and Construction come under Secondary Sector.

Tertiary Sector is the largest sector of the Indian economy. It supports the Primary and Secondary sectors. Economic activities in this sector do not produce any goods but support in their production. Trade, Hotels and Restaurants, Transport, Communications, Finance, Insurance, Real Estate, Public Administration, etc. comes under Tertiary Sector.

Methods of Calculating GDP for Different Sectors

To estimate the GDP, India uses Production approach, Expenditure approach and Income approach. Production approach is being adopted to estimate the GDP in the Agriculture, Mining and Manufacturing (registered) and Electricity and Gas.

Expenditure approach is being adopted to estimate the GDP from Construction.

Income approach is being adopted to estimate the GDP from Manufacturing (unregistered), Water Supply and the entire Service sector.

Limitations of GDP

Though GDP is used in the measure of standard of living of a country by calculating the Per Capita Income, it masks the underlying inequalities by assigning the same Per Capita Income to the Rich and the Poor.

GDP mainly focusses on growth rather than on development. It does not depict whether the growth can be sustainable or not. In Indian economy, there is a significant shift from Agriculture sector to Services sector bypassing the Industries sector and sectoral contribution does not indicate equity (inclusiveness) over a period of time.