IAS Prelims : GS Economics : Sectors of Economy

It is important to understand the economic system of country. For having grasp over economic system and to make the policies accordingly, economists have divided economic system into different sectors so that required policies actions and initiatives can be taken to get high growth trajectory and engagement of population in various employments can be identified. Economy has been divided into three sectors: Primary Sector, Secondary Sector and Tertiary Sector.

Brief description of each sector is as follows:-

Primary Sector:  Primary sector deals with agriculture and allied activities. All economic activities happening in agriculture and allied activities are counted under the primary sector. Agriculture, mining and quarrying, fishing, forestry, lumbering etc are examples of primary sector.

Secondary Sector:  it is related to the manufacturing and industrial activities where raw materials are transformed into finished forms or other forms. Clothing, energy utilities, ship building, Steel plant etc are examples of secondary Sector activities.

Tertiary Sector: This sector involves the services which are provided to different entities such consumers and producer. Hotel, insurance, banking, consultancy services etc are examples of Tertiary Activities.

Quaternary Sector: Further some economists have added one more category which is known as the Quaternary sector which is characterized by the intellectual persons or individuals or group of individual. It includes the research and development activities.

The contribution of different sectors in Gross Domestic Product (GDP) can be used as tool to classify countries into different categories such as developed and developing countries. Developed countries are characterized low contribution of primary sector in GDP of country. Contributions of secondary and tertiary sector are higher in developed countries. Very small proportion of population is engaged in primary sector in developed countries.

Generally, contribution of primary sector in GDP start declining as a country starts developing.  Similarly, based on the contribution of different sectors country can be classified into agrarian, industrial or service economy. A country which has comparatively high contribution of primary sector is known as agrarian economy and so on.

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