Sectors of the Indian Economy — Measuring Output & Jobs

❓ Milk powder: Final good or Intermediate good — should it be counted in GDP?

🧴 Answer: Count it in GDP only when it is a final good (sold for final consumption or capital formation). If the same milk powder is sold to a baker as an intermediate input, do not add its full value separately in GDP (to avoid double counting). ✅ Alternatively, under the value-added method, count the manufacturer’s value added once—regardless of whether the output is sold to a consumer or used as an input.

📊 Comparing the Three Sectors (Primary • Secondary • Tertiary)

To gauge performance, we aggregate the value of final goods & services produced by each sector:

Primary output + Secondary output + Tertiary output = GDP (final goods/services only)

🚫 Why “final goods only”? (Double counting example)

  • 👨‍🌾 Farmer sells 1 tonne wheat to flour mill for ₹100 (intermediate for the mill).
  • 🏭 Flour mill sells flour to baker for ₹150 (final for mill, but intermediate for baker).
  • 👨‍🍳 Baker sells bread to shopkeeper for ₹200.
  • 🛒 Shopkeeper sells bread to consumer for ₹250 → final good.

✅ GDP by final output approach = value of bread to the consumer = ₹250 (it already embeds wheat + flour).

✅ GDP by value-added approach (no double counting):

  • Farmer VA = ₹100
  • Mill VA = ₹150 − ₹100 = ₹50
  • Baker VA = ₹200 − ₹150 = ₹50
  • Shopkeeper VA = ₹250 − ₹200 = ₹50
  • Total VA = ₹250 ✅ (same as final value)

📘 Gross Domestic Product (GDP)

Definition: Market value of final goods & services produced within a country’s domestic territory during one year.

  • 🏢 Includes output by resident & non-resident producers located domestically (e.g., MNC plants, foreign bank branches).
  • 🏛️ In India, compilation is led by the Ministry of Statistics & Programme Implementation (MoSPI).

🧾 Nominal GDP — illustration (as given)

  • 2021–22 (PE): ₹236.65 lakh crore
  • 2022–23 (est.): ₹273.08 lakh crore → nominal growth ~15.4% (vs ~19.5% in 2021–22)

📉 “Negative growth” (quick recap)

Decline in a company’s sales/earnings or a fall in an economy’s GDP in a quarter. Often accompanied by weak wage growth and tighter money supply—may signal recessionary conditions.

⏳ Historical Change in Sectors

  • 🟢 Long ago, most workers were in the Primary sector.
  • ⚙️ With industrialisation, jobs & output shifted to the Secondary sector.
  • 🛎️ In recent decades (especially in developed economies), there’s a further shift toward the Tertiary (services) sector.

🇮🇳 India: Primary • Secondary • Tertiary

  • 1973–74 → 2013–14: output rose in all three sectors, but the tertiary sector grew the most and became the largest producer.
  • Services now dominate production and employment relative shares (though agriculture still employs many).

📈 Why the rise of Tertiary sector?

  • 🏥 Basic services (health, education, policing, post & telecom) expand as the state and society develop.
  • 🚚 Growth of transport, communication, trade as agriculture & industry expand.
  • 💵 Higher incomes → higher demand for services (tourism, restaurants, finance, etc.).
  • 💻 New-age services with ICT & globalisation (IT/ITES, digital platforms, logistics).

👥 Where are most people employed?

  • 📉 Share of primary sector in GDP fell sharply (≈ 40% → ≈ 15%).
  • ⚙️ Secondary’s GDP share rose (≈ 10% → ≈ 20%).
  • 🛎️ Tertiary jobs share also increased (≈ 15% → ≈ 25%).
  • ❗ Despite growth, secondary & tertiary did not create enough jobs—industrial output grew ~8× while employment ~2.5× in the period cited.
  • 🌾 Over half of workers still in primary (agriculture) producing only about a quarter of GDP → indicates underemployment.

💼 Employment, Unemployment & Underemployment

  • Employment: Having paid work; contributes to GDP.
  • Unemployment: Person is without work, actively seeking a job, but unable to find one.
  • Underemployment / Disguised Unemployment: People are working, but less than their potential or with surplus labour hidden in jobs (e.g., many family members on a small farm where fewer could produce the same output).

🧩 Hidden Unemployment — examples

  • 🙍 Unemployed not registered in official stats (discouraged workers).
  • 🧑‍🎓 Skilled people stuck in low-skilled or part-time jobs who want full-time skilled work.

🆚 Open vs Disguised Unemployment

🚪 Open Unemployment🫥 Disguised (Hidden) Unemployment
No job; status is clearly visible as unemployed.Many working on a task where some are redundant; not obvious.
Included in unemployment statistics (if actively seeking).Hard to measure; productivity per worker is very low.

📉 Current unemployment rate — illustration (as given)

CMIE data example: India’s unemployment rate was reported at 7.14% in Jan 2023 (Dec: 8.3%, Nov: 8.0%, Sep: 6.43%).

🧮 How is the Unemployment Rate of a Country Calculated?

Unemployment Rate (%) = (Number of Unemployed ÷ Labour Force) × 100

  • Unemployed: Working-age people (typically 15+) without work, available for work, and actively seeking jobs.
  • Labour Force: Employed + Unemployed (actively seeking). It excludes those not seeking work (students not looking, homemakers not seeking, retired, discouraged workers).
  • 📌 Note: Different surveys (e.g., PLFS, CMIE) use specific reference periods & definitions—rates may differ accordingly.

Example: If 46 million are unemployed and 520 million are in the labour force, Unemployment Rate = (46 ÷ 520) × 100 ≈ 8.85%.

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