Why this chapter matters for UPSC: The chapter supplies the terms that GS3 questions on the economy take for granted: primary, secondary and tertiary sectors; final and intermediate goods; GDP and GVA; disguised unemployment; organised and unorganised work; public and private sectors. Its central finding, that India's output moved to services while most workers stayed in agriculture, underlies Mains questions on jobless growth, manufacturing's share of output, informal work and the Labour Codes.

Contemporary hook: In 2025-26 the tertiary sector produced 54.0% of India's gross value added (GVA) at current prices, the secondary sector 25.9% and the primary sector 20.1% (National Accounts Statistics 2026, provisional estimates). In 2025 agriculture still employed 43.0% of India's workers (Periodic Labour Force Survey, January-December 2025). On 1 July 2026 the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 came into force across rural India and the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 stood repealed; the guarantee rose from 100 to 125 days of work a year.


🧠 First Principles — Read This First

Sectors are groups made for a purpose. NCERT classifies economic activities in three ways: by the nature of the activity (primary, secondary, tertiary), by the conditions of employment (organised, unorganised) and by who owns the assets (public, private). "The criterion for classification could be many depending on what we desire to find out."

Count values, and count only final goods. You cannot add cars to nails, so economists add the values of goods and services. The wheat a farmer sells to a mill and the flour the mill sells to a biscuit maker are already inside the price of the biscuits; counting them again would mean "counting the value of the same things a number of times".

Output moved; jobs did not. Between 1977-78 and 2017-18 the tertiary sector overtook the primary sector in production, yet the primary sector "continues to be the largest employer even now". NCERT's reason: "not enough jobs were created in the secondary and tertiary sectors."

Working is not the same as being fully employed. When five members of a family work a plot that needs fewer hands, everyone is busy but nobody is fully employed. This is underemployment, or disguised unemployment: take some workers away and output does not fall.

Most Indians work without security. The unorganised sector, of "small and scattered units which are largely outside the control of the government", employs most of India's workers. Creating work and protecting these workers is the chapter's case for an employment guarantee and for a public sector.


PART 1 — Quick Reference

Table 1: The three sectors (NCERT's definitions)

SectorNCERT's definitionAlso calledNCERT's examples
Primary"When we produce a good by exploiting natural resources, it is an activity of the primary sector." It "forms the base for all other products that we subsequently make.""agriculture and related sector"cotton cultivation, dairy, minerals and ores, fishing, forestry
Secondary"activities in which natural products are changed into other forms through ways of manufacturing that we associate with industrial activity", in "a factory, a workshop or at home""industrial sector"yarn and cloth from cotton, sugar or gur from sugarcane, bricks from earth
Tertiary"activities that help in the development of the primary and secondary sectors"; by themselves they "do not produce a good but they are an aid or a support for the production process""service sector"transport, storage, communication, banking, trade; teachers, doctors, washermen, barbers, cobblers, lawyers; internet cafes, ATM booths, call centres, software companies

Source: NCERT, Understanding Economic Development, Class X, ch. 2 "Sectors of the Indian Economy", Reprint 2026-27, p. 20. The tertiary sector also "includes some essential services that may not directly help in the production of goods", such as teaching, medicine and administration.

Table 2: How the sectors depend on each other (NCERT Table 2.1)

NCERT's exampleWhat would happen (NCERT)What it shows
Farmers refuse to sell sugarcane to a sugar mill"The mill will have to shut down."NCERT: "This is an example of the secondary or industrial sector being dependent on the primary."
Companies stop buying Indian cotton and import all they needCotton cultivation becomes less profitable and farmers "may even go bankrupt"; "Cotton prices will fall."The primary sector depends on the secondary for its market
The price of fertilisers or pumpsets goes up"Cost of cultivation of the farmers will rise and their profits will be reduced."The primary sector depends on the secondary for its inputs
Transporters strike and lorries refuse to carry vegetables and milk from rural areas"Food will become scarce in urban areas whereas farmers will be unable to sell their products."Farmers and urban consumers both depend on the tertiary sector

Source: NCERT, ch. 2, Reprint 2026-27, p. 21. NCERT fills in only the first row and leaves the rest to the student; the entries in the last column for rows 2-4 are ours. NCERT's point is that the three sectors "are highly interdependent".

The three sectors and how each depends on the others (NCERT Tables 2.1 and 2.2)Three columns, one for each sector, then four lanes of cause and effect. Column 1, primary sector, also called the agriculture and related sector: when we produce a good by exploiting natural resources, it is an activity of the primary sector; it forms the base for all other products that we subsequently make. Examples: cotton cultivation, dairy, minerals and ores, fishing, forestry. Column 2, secondary sector, also called the industrial sector: activities in which natural products are changed into other forms through ways of manufacturing, in a factory, a workshop or at home. Examples: yarn and cloth from cotton, sugar or gur from sugarcane, bricks from earth. Column 3, tertiary sector, also called the service sector: activities that help in the development of the primary and secondary sectors; they do not produce a good but are an aid or a support for the production process. Examples: transport, storage, communication, banking, trade; teachers, doctors, washermen, barbers, cobblers, lawyers; internet cafes, ATM booths, call centres, software companies. Lane 1, an arrow from the primary to the secondary column: farmers refuse to sell sugarcane to a sugar mill, and the mill will have to shut down; NCERT calls this the secondary or industrial sector being dependent on the primary. Lane 2, an arrow from the secondary to the primary: companies stop buying Indian cotton and import all they need, so cotton cultivation becomes less profitable, farmers may even go bankrupt, and cotton prices will fall; the primary sector depends on the secondary for its market (the page's own entry). Lane 3, secondary to primary: the price of fertilisers or pumpsets goes up, so the cost of cultivation of the farmers will rise and their profits will be reduced; the primary sector depends on the secondary for its inputs (the page's own entry). Lane 4, tertiary to primary: transporters strike and lorries refuse to carry vegetables and milk from rural areas, so food will become scarce in urban areas whereas farmers will be unable to sell their products; farmers and urban consumers both depend on the tertiary sector (the page's own entry). In each lane the shaded box is what happens and the plain box is what follows. NCERT's point: the three sectors are highly interdependent.Primary sectoralso called "agriculture and relatedsector"NCERT's definition•"When we produce a good byexploiting natural resources, itis an activity of the primarysector."•It "forms the base for all otherproducts that we subsequentlymake."NCERT's examples•Cotton cultivation•Dairy•Minerals and ores•Fishing•ForestrySecondary sectoralso called "industrial sector"NCERT's definition•"Activities in which naturalproducts are changed into otherforms through ways ofmanufacturing that we associatewith industrial activity", in "afactory, a workshop or at home".NCERT's examples•Yarn and cloth from cotton•Sugar or gur from sugarcane•Bricks from earthTertiary sectoralso called "service sector"NCERT's definition•"Activities that help in thedevelopment of the primary andsecondary sectors"; they "do notproduce a good but they are an aidor a support for the productionprocess".NCERT's examples•Transport, storage, communication,banking, trade•Teachers, doctors, washermen,barbers, cobblers, lawyers•Internet cafes, ATM booths, callcentres, software companiesHOW THE SECTORS DEPEND ON EACH OTHER (NCERT TABLE 2.1)Shaded box: what happens. Plain box: what follows. The arrow points from one to the other.Farmers refuse to sell sugarcane toa sugar mill."The mill will have to shut down."NCERT: "This is an example of the secondary or industrial sector being dependent on the primary."Companies stop buying Indian cottonand import all they need.Cotton cultivation becomes lessprofitable; farmers "may even gobankrupt"; "Cotton prices willfall."The primary sector depends on the secondary for its market (our entry).The price of fertilisers or pumpsetsgoes up."Cost of cultivation of the farmerswill rise and their profits will bereduced."The primary sector depends on the secondary for its inputs (our entry).Transporters strike: lorries refuseto carry vegetables and milk fromrural areas."Food will become scarce in urbanareas whereas farmers will be unableto sell their products."Farmers and urban consumers both depend on the tertiary sector (our entry).NCERT: the three sectors "are highly interdependent".
Arrows run from what happens to what follows, in NCERT's words. Source: NCERT Class X, Understanding Economic Development, ch. 2 (Reprint 2026-27), p. 20 (the three sectors) and p. 21 (Table 2.1). NCERT fills in only the first lane; the other three outcomes are NCERT's, and the entries marked 'our entry' about what each one shows are the page's own (Table 2 of this page). Schematic, not to scale.

Table 3: Share of employment, 1977-78 and 2017-18 (NCERT Graph 3)

Sector1977-782017-18
Primary71%44%
Secondary11%25%
Tertiary18%31%

Source: NCERT, ch. 2, Reprint 2026-27, p. 25, Graph 3 "Share of Sectors in Employment (%)". NCERT's employment figures come from the five-yearly employment surveys of the National Sample Survey Organisation, now the National Statistical Office (teachers' note, p. 18). Graph 2 on the same page, "Share of Sectors in GVA", prints no values. Read from its bars and from Graph 1, the primary sector's share of GVA was between two-fifths and a half in 1977-78 and about a fifth in 2017-18, and the tertiary sector's share in 2017-18 was a little over half (NCERT's own Exercise 2(d) answer is 50 to 60 per cent). So over forty years the primary sector's share of output fell much faster than its share of jobs: this is what Table 2.2 asks students to find.

Table 4: The three sectors in GVA, 2025-26 (National Accounts Statistics 2026)

Sector (with NAS sub-sectors)Share of GVA, current pricesShare of GVA, constant (2022-23) pricesReal growth, 2025-26
Primary: agriculture, livestock, forestry and fishing (18.20%); mining and quarrying (1.89%)20.09%19.81%3.67%
Secondary: manufacturing (14.88%); electricity, gas, water supply and other utilities (2.61%); construction (8.39%)25.87%26.88%7.64%
Tertiary: trade, transport, finance, real estate, public administration and other services54.03%53.31%9.71%
Total GVA₹3,13,94,691 crore₹2,95,90,329 crore7.91%

Source: Ministry of Statistics and Programme Implementation (MoSPI), National Accounts Statistics 2026, Statement 8.17.2 (provisional estimates; 2025-26 figures are provisional, 2024-25 first revised) and Statement 8.17.1. Sub-sector shares in brackets are at current prices. Shares are our arithmetic from the Statement's rupee values. NCERT's graphs stop at 2017-18 and use the older 2011-12 price base; the national accounts now use 2022-23 as the base year, so the two sets of figures are not directly comparable. The tertiary sector's share was a little over half in NCERT's 2017-18 graph and is 54% in 2025-26.

Table 5: Where India's workers are, 2024 and 2025 (PLFS)

Industry of work20242025
Agriculture44.8%43.0%
Mining and quarrying0.3%0.3%
Manufacturing11.6%12.1%
Electricity, water, etc.0.6%0.7%
Construction12.3%12.0%
Trade, hotel and restaurant12.5%12.9%
Transport, storage and communications5.8%5.8%
Other services12.2%13.1%
Primary (agriculture + mining), our sum45.1%43.3%
Secondary (manufacturing + utilities + construction), our sum24.5%24.8%
Tertiary (trade, transport, other services), our sum30.5%31.8%

Source: MoSPI, Periodic Labour Force Survey (PLFS) Annual Report 2025, press note (released 27 March 2026), Fig. 5 "Percentage distribution of workers (in usual status) by industry"; workers aged 15 and above, usual status (principal and subsidiary), January-December 2025. The press note also counts 61.6 crore employed persons aged 15 and above (41.6 crore men, 20.0 crore women). The sector totals in italics are our sums of the press note's rows. Set beside Table 4, about 43% of workers produce about a fifth of GVA, the same gap NCERT describes, narrower than in 1977-78 but not closed.

Share of workers against share of output, by sectorFour 100 per cent stacked horizontal bars, each split into primary, secondary and tertiary sectors, drawn to one scale from 0 to 100 per cent. A group of three bars, share of workers: 1977-78 (NCERT Graph 3), primary 71%, secondary 11%, tertiary 18%; 2017-18 (NCERT Graph 3), primary 44%, secondary 25%, tertiary 31%; 2025 (Periodic Labour Force Survey, January to December 2025; the sector totals are the page's own sums of the survey's rows), primary 43.3%, secondary 24.8%, tertiary 31.8%. One bar, share of output, gross value added at current prices in 2025-26 (National Accounts Statistics 2026, provisional estimates): primary 20.09%, secondary 25.87%, tertiary 54.03%. A note says that about 43% of workers produce about a fifth of GVA.PrimarySecondaryTertiarySHARE OF WORKERSWorkers, 1977-78NCERT Graph 371%11%18%Workers, 2017-18NCERT Graph 344%25%31%Workers, 2025PLFS, our sums43.3%24.8%31.8%SHARE OF OUTPUTOutput (GVA), 2025-26NAS 2026, current prices20.09%25.87%54.03%0255075100Per cent of workers, or of gross value addedSet beside each other: about 43% of workers (2025) produce about a fifth of GVA (2025-26, current prices).
All bars on one 0 to 100 per cent scale; bars from different sources and price bases are not strictly comparable (NCERT's graphs stop at 2017-18 and use the older 2011-12 price base). Source: Tables 3, 4 and 5 of this page: NCERT Class X, Understanding Economic Development, ch. 2 (Reprint 2026-27), Graph 3, p. 25; MoSPI, National Accounts Statistics 2026, Statement 8.17.2 (provisional estimates; shares are the page's arithmetic from rupee values); MoSPI, PLFS Annual Report 2025, press note (27 March 2026), Fig. 5, workers aged 15 and above, usual status. NCERT's Graph 2 prints no GVA values, so there is no 1977-78 or 2017-18 output bar.

Table 6: Organised and unorganised workers in the late 1990s (NCERT Table 2.3, completed)

SectorOrganised (million)Unorganised (million)Total (million)
Primary1232233
Secondary4174115
Tertiary4088128
Total82394476
Total in percentage17.2%82.8%100%

Source: NCERT, ch. 2, Reprint 2026-27, p. 31. NCERT leaves the primary total, the unorganised total, the grand total and the percentages blank; they are worked out here. Of agricultural (primary) workers, 232 of 233 million, or 99.6%, were in the unorganised sector. NCERT gives no source for the table.

Organised and unorganised workers by sector, late 1990s (NCERT Table 2.3)A horizontal stacked bar chart on one axis from 0 to 500 million workers, late 1990s, four bars. Each bar shows organised workers (first colour) and unorganised workers (second colour). Primary: organised 1 million, unorganised 232 million, total 233 million. Secondary: organised 41, unorganised 74, total 115. Tertiary: organised 40, unorganised 88, total 128. Total: organised 82 million (17.2%), unorganised 394 million (82.8%), total 476 million (100%). A note says that 232 of 233 million agricultural (primary) workers, or 99.6%, were in the unorganised sector.OrganisedUnorganisedPrimaryOrganised: 1232Total: 233Secondary4174Total: 115Tertiary4088Total: 128Total82 (17.2%)394 (82.8%)Total: 476 (100%)0100200300400500Workers, millionsOf agricultural (primary) workers, 232 of 233 million, or 99.6%, were in the unorganised sector.
All bars on one axis in millions of workers. Source: Table 6 of this page: NCERT Class X, Understanding Economic Development, ch. 2 (Reprint 2026-27), Table 2.3, p. 31 (NCERT gives no source for the table; the period, late 1990s, is as Table 6 of this page heads it). NCERT leaves the primary total, the unorganised total, the grand total and the percentages blank; the page works them out.

Table 7: From MGNREGA to VB-G RAM G

Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA)Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 (VB-G RAM G)
Who and how muchThose "able to, and are in need of, work in rural areas were guaranteed 100 days of employment in a year" (NCERT)Raises the guarantee "from 100 to 125 days in every financial year for all rural households" (PIB)
If work is not givenUnemployment allowance (NCERT)
Women"at least one-third of the beneficiaries shall be women" (Schedule II)
StatusAct of 2005; repealed from 1 July 2026Passed by Parliament in December 2025; in force across all rural areas from 1 July 2026, when MGNREGA "stands repealed from the same date" (PIB)

Source: NCERT, ch. 2, Reprint 2026-27, p. 29. Mahatma Gandhi National Rural Employment Guarantee Act, 2005, Schedule II (Ministry of Rural Development text). Press Information Bureau, backgrounder on VB-G RAM G, 11 May 2026. NCERT says "In 2025, this Act was replaced by" the new law: the new Act is of 2025, but it came into force, and MGNREGA was repealed, only on 1 July 2026. NCERT shortens the name to "Viksit Bharat-G RAM G 2025", leaving out "(Gramin)".

Table 8: The laws NCERT names for the organised sector, and where they are now

Law NCERT names (p. 30)Now subsumed in (in force from 21 November 2025)
Factories Act (1948)Occupational Safety, Health and Working Conditions Code, 2020
Minimum Wages Act (1948)Code on Wages, 2019
Payment of Gratuity Act (1972)Code on Social Security, 2020
Shops and Establishments ActNot in the Labour Ministry's list of laws subsumed by the Codes

Source: NCERT, ch. 2, Reprint 2026-27, p. 30. Press Information Bureau, Ministry of Labour and Employment, 21 November 2025 (the four Codes, including the Industrial Relations Code, 2020, made effective from 21 November 2025, "rationalising 29 existing labour laws"). Ministry of Labour and Employment, Annual Report 2025-26, para 1.3 and the chapters on each Code: the Code on Wages was notified on 8 August 2019 and the other three on 29 September 2020; draft Rules under all four were published for comments on 30 December 2025.


PART 2 — Concepts & Narrative

Sectors of economic activities

NCERT begins with pictures of people at work: some produce goods, others services. To make sense of so many activities, we "group them (classify them) using some important criterion. These groups are also called sectors." Table 1 gives NCERT's first classification. The primary sector depends "mainly, but not entirely, on natural factors like rainfall, sunshine and climate"; the secondary sector makes products that are "not produced by nature but has to be made"; the tertiary sector generates "services rather than goods". In recent times, NCERT adds, "certain new services based on information technology" have become important.

The three are linked (Table 2). A mill needs sugarcane; a farmer needs fertiliser, pumpsets and electricity from industry; both need trucks, godowns and banks.

Comparing the three sectors: values, final goods and GDP

How do we add up "cars and computers and nails and furniture"? We add their values. If 10,000 kg of wheat sells at Rs 20 per kg, its value is Rs 2,00,000; 5,000 coconuts at Rs 15 each are worth Rs 75,000. The values of goods and services in all three sectors are calculated and added.

But "It makes sense only to include the final goods and services." A farmer sells wheat to a flour mill at Rs 20 per kg; the mill sells flour to a biscuit company at Rs 25 per kg; the company adds sugar and oil and sells four packets of biscuits for Rs 80. "Intermediate goods are used up in producing final goods and services." The Rs 80 "already includes the value of flour (Rs 25)", so counting the flour and wheat again would count the same things "a number of times".

Key Term

Final and intermediate goods. Final goods are "goods that reach the consumers" (the biscuits). Intermediate goods, such as the wheat and the flour, "are used up in producing final goods and services". Only final goods are counted, because their value already contains the value of the intermediate goods used to make them.

Explainer

Value added at each stage. NCERT asks students to work out the total value "by using the method of value added at each stage". Take NCERT's prices and assume one kilogram of flour makes the four packets, and leave out the sugar, the oil and the farmer's own inputs. The farmer adds Rs 20 (wheat), the mill adds Rs 5 (Rs 25 − Rs 20) and the biscuit company adds Rs 55 (Rs 80 − Rs 25). The values added sum to Rs 80, the value of the final good. Adding all the sales instead (20 + 25 + 80 = Rs 125) would count the wheat three times and the flour twice.

"The value of final goods and services produced in each sector during a particular year provides the total production of the sector for that year." The sum across sectors is the Gross Domestic Product (GDP). In India the "mammoth task" of measuring it is done by a central government ministry, the Ministry of Statistics and Programme Implementation, with the help of State and Union Territory departments.

Key Term

Gross Domestic Product (GDP). NCERT: "It is the value of all final goods and services produced within a country during a particular year. GDP shows how big the economy is." Two words carry the definition: final (no double counting) and within a country (domestic production, whoever produces it).

Explainer

GDP and GVA. The 2026-27 reprint draws its graphs in gross value added, not GDP. NCERT explains: "Recently Indian Government began to bring out the contribution of three sectors towards Gross Value Added (GVA) in place of the contribution of three sectors towards Gross Domestic Product to be at par with global practices." The GVA, it says, "measures the contribution of three sectors of an economy after adjusting for taxes and subsidies", and leaves the difference for higher classes. In India's national accounts, GDP is GVA plus net taxes on products (taxes on products minus subsidies on products). For 2025-26 at constant (2022-23) prices, National Accounts Statistics 2026 puts GVA at ₹2,95,90,329 crore and net taxes on products at ₹28,79,771 crore, which together give GDP of ₹3,24,70,100 crore (Statement 8.17.1). The teachers' note adds that the chapter's GVA figures are real GVA at 2011-12 prices from the Economic Survey and that "Due to change in methodology, latest data is not used in the chapter."

Historical change in sectors

In the histories of the now-developed countries, NCERT says, the primary sector came first. As farming improved, it produced more food than before, and people took up crafts, trade, transport and administration. "Over a long time (more than hundred years)", new methods of manufacturing brought factories, people moved from farms to factories, and the secondary sector "gradually became the most important in total production and employment". Then: "In the past 100 years, there has been a further shift from secondary to tertiary sector in developed countries." In those countries the service sector is now the largest in production and in employment.

Primary, secondary and tertiary sectors in India

Graph 1 shows production in the three sectors in 1977-78 and 2017-18, years NCERT chose "because the data are comparable and authentic". Over these forty years production rose in all three sectors but "it has increased the most in the tertiary sector", so that in 2017-18 the tertiary sector "has emerged as the largest producing sector in India replacing the primary sector."

NCERT gives four reasons for the rise of services:

  1. Basic services. Hospitals, schools, post and telegraph, police, courts, municipal bodies, defence, transport, banks and insurance are needed in every country, and in a developing country "the government has to take responsibility for the provision of these services."
  2. Support for other sectors. "Greater the development of the primary and secondary sectors, more would be the demand for such services" as transport, trade and storage.
  3. Rising incomes. As incomes rise, some people demand "eating out, tourism, shopping, private hospitals, private schools, professional training etc."
  4. New services. Services based on information and communication technology "have become important and essential" (chapter 4 returns to these).

NCERT adds a warning: "not all of the service sector is growing equally well." A limited number of services employ highly skilled and educated workers; at the other end, "a very large number of workers" such as small shopkeepers, repair persons and transport persons "barely manage to earn a living". So "only a part of this sector is growing in importance."

Where are most of the people employed?

"A remarkable fact about India is that while there has been a change in the share of the three sectors in GVA, a similar shift has not taken place in employment." In Graph 3, the primary sector's share of employment fell from 71% to 44% between 1977-78 and 2017-18, but it is still the largest employer (Table 3). NCERT's explanation: industrial output went up "by more than nine times" while industrial employment rose "around three times", and service production rose 14 times while service employment rose "around five times".

Beyond the Book

The same gap in 2025. In National Accounts Statistics 2026, the primary sector produced 20.1% of GVA at current prices in 2025-26 and the tertiary sector 54.0% (Table 4). In the PLFS for January-December 2025, agriculture employed 43.0% of workers, down from 44.8% in 2024, while manufacturing rose from 11.6% to 12.1% and other services from 12.2% to 13.1% (Table 5). The share of workers in regular wage or salaried jobs rose from 22.4% to 23.6%, and the share of the self-employed fell from 57.5% to 56.2%. The unemployment rate for persons aged 15 and above was 3.1% for both men and women, and youth unemployment (ages 15-29) fell from 10.3% to 9.9% (usual status, PLFS 2025 press note).

Underemployment: Laxmi's farm

Laxmi owns "about two hectares of unirrigated land", depends on rain and grows jowar and arhar. All five members of her family work the plot through the year because "They have nowhere else to go for work." Everyone is working, but "their labour effort gets divided. Each one is doing some work but no one is fully employed." If a landlord, Sukhram, hires one or two of them, or two find work in a factory, the family earns more and the farm produces as much as before.

"This is the situation of underemployment, where people are apparently working but all of them are made to work less than their potential." Because it is hidden, unlike someone who has no job at all, "it is also called disguised unemployment." It is not only rural: there are "thousands of casual workers in the service sector in urban areas who search for daily employment", painters, plumbers and repair persons who do not find work every day, and street sellers who spend the whole day and earn very little.

Key Term

Disguised unemployment. More people work in an activity than it needs, so each works below capacity. The test is NCERT's: "even if you move a few people out, production will not be affected." Open unemployment is the other kind: a person who has no job at all and is "clearly visible as unemployed" (Exercise 11 asks for this contrast).

How to create more employment

NCERT works through Laxmi's case:

  • Irrigation. A well, paid for by the government or a bank loan, lets her grow a second crop, wheat, in the rabi season. If one hectare of wheat employs two people for 50 days, two more family members get work on her own field. A dam and canals for many farms would create still more work within agriculture.
  • Roads, transport and storage. If farmers produce more, they must sell it; better rural roads, transport and storage create work for farmers and for people in transport and trade.
  • Cheap credit. Without it Laxmi borrows from moneylenders "and pay a high rate of interest"; a local bank lending at a reasonable rate lets her buy seeds, fertiliser and pumpsets in time (chapter 3 takes this up).
  • Industries and services in semi-rural areas. A dal mill for arhar and chickpea, a cold storage for potatoes and onions, honey collection centres near forests, and units that process vegetables and fruit.
  • Education, health and tourism. NCERT notes that "about 60 per cent of the population belongs to the age group 5-29 years" and only about 51 per cent of them attend educational institutions. A study by the erstwhile Planning Commission (now NITI Aayog) estimated that "nearly 20 lakh jobs can be created in the education sector alone", and that an improved tourism sector could give additional employment every year to "more than 35 lakh people". NCERT dates neither figure.

These take time, so "For the short-term, we need some quick measures." The Union Government "made a law implementing the Right to Work in about 625 districts of India": MGNREGA, 2005. Under it, those willing and in need of work in rural areas "were guaranteed 100 days of employment in a year", with an unemployment allowance if the government failed to provide work, and preference for works that "would in future help to increase the production from land". NCERT then adds: "In 2025, this Act was replaced by Viksit Bharat- Guarantee for Rozgar and Ajeevika Mission (Viksit Bharat-G RAM G 2025)."

Beyond the Book

VB-G RAM G: what changed and when. Parliament passed the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act in 2025. Its commencement was notified across all rural areas of the country with effect from 1 July 2026, and from that date MGNREGA, 2005 "stands repealed" (PIB backgrounder, 11 May 2026). The new Act raises the statutory guarantee "from 100 to 125 days in every financial year for all rural households". So for an exam answer: the Act is of 2025, it has been in force since 1 July 2026, and MGNREGA was repealed on that date, not in 2025. Under MGNREGA, Schedule II required that "at least one-third of the beneficiaries shall be women".

Organised and unorganised sectors

The second classification looks at how people are employed. "Organised sector covers those enterprises or places of work where the terms of employment are regular and therefore, people have assured work." These enterprises are registered by the government and follow rules given in laws "such as the Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops and Establishments Act etc." Their workers have security of employment and fixed hours, are paid overtime, and get "paid leave, payment during holidays, provident fund, gratuity etc.", with pensions on retirement.

"The unorganised sector is characterised by small and scattered units which are largely outside the control of the government. There are rules and regulations but these are not followed." Jobs are low-paid and irregular, with no overtime, paid leave or sick leave, and people "can be asked to leave without any reason." The sector also includes the self-employed, such as street sellers, repair workers and farmers.

NCERT's pair makes it concrete. Kanta works in an office from 9.30 a.m. to 5.30 p.m., is paid monthly, gets provident fund, medical and other allowances and a paid Sunday, and was given an appointment letter. Kamal, her neighbour, is a daily wage labourer in a grocery shop from 7:30 in the morning till 8:00 p.m., is not paid for days he does not work, has no letter of employment and "can be asked to leave anytime by his employer."

Key Term

Organised vs unorganised sector. The criterion is the conditions of employment, not the kind of work. A teacher in a registered school is in the organised sector; a handloom weaver working at home is in the unorganised sector. In the late 1990s about 83% of India's workers were in the unorganised sector, including almost all agricultural workers (Table 6).

How to protect workers in the unorganised sector

Organised jobs are the "most sought-after", but "the employment opportunities in the organised sector have been expanding very slowly." Some organised enterprises operate in the unorganised sector "to evade taxes and refuse to follow laws that protect labourers", and "Since the 1990s, it is also common to see a large number of workers losing their jobs in the organised sector."

Who needs protection? In rural areas, landless agricultural labourers, small and marginal farmers, sharecroppers and artisans; "Nearly 80 per cent of rural households in India are in small and marginal farmer category." They need timely seeds, inputs, credit, storage and marketing outlets. In urban areas, workers in small-scale industry, casual workers in construction, trade and transport, street vendors, head-load workers, garment makers and rag pickers. And a majority of workers from scheduled castes, tribes and backward communities are in the unorganised sector, where they face social discrimination as well as low and irregular pay. "Protection and support to the unorganised sector workers is thus necessary for both economic and social development."

Beyond the Book

e-Shram. The Ministry of Labour and Employment launched the e-Shram portal on 26 August 2021 as the "country's first-ever Aadhaar-seeded National Database of Unorganised Workers". As on 18 August 2026 it had 31.89 crore registrations, and women made up 54.28% of registered workers (PIB, 25 August 2026).

Beyond the Book

The four Labour Codes. The Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 were made effective from 21 November 2025, "rationalising 29 existing labour laws" (PIB, 21 November 2025). Three of the four laws NCERT names for the organised sector are now inside the Codes: the Factories Act, 1948 in the Occupational Safety Code, the Minimum Wages Act, 1948 in the Code on Wages, and the Payment of Gratuity Act, 1972 in the Code on Social Security (Ministry of Labour and Employment, Annual Report 2025-26). Shops and establishments laws are not in that list (Table 8).

Public and private sectors

The third classification is by ownership. "In the public sector, the government owns most of the assets and provides all the services." In the private sector, assets and services are "in the hands of private individuals or companies". NCERT's examples: Railways or the post office (public); Tata Iron and Steel Company Limited (TISCO) or Reliance Industries Limited (RIL) (private). Private activity is "guided by the motive to earn profits"; "The purpose of the public sector is not just to earn profits."

Why does government spend? First, some things society needs cost more than private firms can raise, and charging thousands of users is hard: roads, bridges, railways, harbours, electricity, irrigation through dams. Second, some activities need support: electricity sold at cost could shut down small units, so government supplies it at rates they can afford; it buys wheat and rice from farmers at a 'fair price' and sells them more cheaply through ration shops, supporting "both farmers and consumers". Third, some things are the government's primary responsibility, health and education above all. NCERT notes that "nearly half of India's children are malnourished and a quarter of them are critically ill", and that "The infant mortality rate of Odisha (36) or Madhya Pradesh (43) is higher than some of the poorest regions of the world."

Beyond the Book

Infant mortality in Odisha and Madhya Pradesh, 2024. The SRS Statistical Report 2024 (Office of the Registrar General, India) gives an infant mortality rate of 28 per 1,000 live births for Odisha and 35 for Madhya Pradesh in 2024, against 24 for India (Statement 46). NCERT does not date its figures of 36 and 43. On child nutrition, NFHS-6 (2023-24) found 29.3% of children under five stunted and 31.8% underweight (PIB, 29 May 2026).

Explainer

Where NCERT's reprint did not keep up with its own data. The 2026-27 reprint moved the output graphs from GDP for 1973-74 and 2013-14 to GVA for 1977-78 and 2017-18, but parts of the text were not changed with them:

  • "more than half of the workers in the country are working in the primary sector" sits beside Graph 3, which gives 44% for 2017-18. The sentence, with its "more than nine times" and "14 times" comparisons, is the 2020-21 edition's text, written when the output graph ran from 1973-74 to 2013-14.
  • Question 4 under Graph 1 asks "What was the GDP of India in 2017–18?", but Graph 1 shows GVA. Read from the graph, total GVA in 2017-18 was roughly ₹120 lakh crore at 2011-12 prices.
  • Table 2.2 is titled "SHARE OF PRIMARY SECTOR IN GDP AND EMPLOYMENT", but its column reads "Share in Gross Value Added (GVA)".
  • The summary speaks of "the last thirty years" and of what services "contribute the most to GDP"; the graphs span forty years and show GVA.
  • Exercise 24 gives GVA for 2001-02 and 2021-22 but asks for shares "in GDP for 2000 and 2013", the old table's years.
  • "In 2025, this Act was replaced": the replacing Act is of 2025, but MGNREGA was repealed only from 1 July 2026.

None of this changes the chapter's argument.

What the pre-2023 edition said

The argument is the same; the data and some wording differ. In the 2020-21 edition:

  • Output graphs. Graph 1 was "GDP by Primary, Secondary and Tertiary Sectors" and Graph 2 "Share of Sectors in GDP (%)", for 1973-74 and 2013-14; Question 4 asked "What was the GDP of India in 2013-14?". Graph 3 (employment) already used 1977-78 and 2017-18.
  • Teachers' note. The data were "Gross Domestic Product at Factor Cost by Industry of Origin at 2011–12 prices", taken from the Real Time Handbook of Statistics on Indian Economy (the RBI's).
  • Table 2.2 column: "Share in GDP". Table 2.3 had no "late 1990s" label and no tertiary total.
  • MGNREGA. "the central government in India made a law implementing the Right to Work in about 625 districts"; workers "are guaranteed 100 days of employment"; no replacing Act. Exercise 17 read "Explain the objective of implementing the NREGA 2005."
  • Infant mortality. "Odisha (41) or Madhya Pradesh (47)".
  • Exercise 24. GDP for 2000 (Rs 52,000, 48,500 and 1,33,500 crore) and 2013 (Rs 8,00,500, 10,74,000 and 38,68,000 crore).

Source: NCERT, Understanding Economic Development, Class X, ch. 2, 2020-21 edition (as archived by the Wayback Machine, 9 October 2021).


PART 3 — UPSC Integration

UPSC Connect

Cross-paper relevance

  • GS3 (Economy) — sectoral composition of output and employment, growth without matching job creation, manufacturing's share, informal work, the Labour Codes, measuring GDP and GVA.
  • GS2 (Social justice; Governance) — the rural employment guarantee (MGNREGA, now VB-G RAM G), social security for unorganised workers (e-Shram), welfare of vulnerable sections.
  • Essay — growth and jobs; dignity of work.

Past questions on this chapter's themes: Mains GS3 2015 (jobless growth), 2016 (globalisation and the shrinking of formal employment), 2017 (industrial growth lagging GDP growth since the reforms), 2023 (manufacturing's share of GDP and MSMEs; structural unemployment and how unemployment is computed) and 2024 (merits and demerits of the four Labour Codes). Question IDs are in the Revision Capsule.

Frames for Mains Answers

1. "Why has India's growth not created enough jobs?" NCERT's core finding: output shifted to services, employment did not (71% to 44% in the primary sector over forty years, Graph 3). In 2025-26 the primary sector produced about a fifth of GVA (NAS 2026) while agriculture held 43.0% of workers (PLFS 2025). Add NCERT's warning that only part of the service sector is growing well, and its remedies: irrigation, rural roads and storage, cheap credit, agro-processing in semi-rural areas.

2. "Disguised unemployment in Indian agriculture." Define it with NCERT's test (move workers out and output does not fall); use Laxmi's farm; extend to urban casual work; link to the rural employment guarantee as a short-term measure and to non-farm jobs as the long-term one.

3. "Informalisation and the protection of unorganised workers." About 83% of workers were unorganised in the late 1990s (NCERT Table 2.3); the self-employed were 56.2% of workers and regular wage or salaried workers 23.6% in 2025 (PLFS). Protection: the Labour Codes in force from 21 November 2025, e-Shram (31.89 crore registrations by 18 August 2026), support for small and marginal farmers and small-scale industry.

4. "From MGNREGA to VB-G RAM G." The right-to-work idea (NCERT); 100 days and an unemployment allowance under MGNREGA; the 2025 Act in force from 1 July 2026, with 125 days in every financial year for all rural households and MGNREGA repealed from that date.

5. "Why does the government run a public sector?" NCERT's three reasons: heavy investment the private sector will not make, support for activities such as cheap electricity and food procurement, and primary duties such as health and education.

Exam Strategy

Prelims fact-traps:

  • The three-sector classification uses the nature of activity; organised/unorganised uses employment conditions; public/private uses ownership of assets (NCERT Exercise 2(a)).
  • GDP counts final goods and services only, produced within the country in a year. GDP = GVA + net taxes on products.
  • In national accounts the primary sector includes mining and quarrying, not just agriculture (NAS 2026 Statement 8.17.2).
  • PLFS 2025 is a calendar-year survey (January-December 2025), not July-June.
  • VB-G RAM G: Act of 2025, in force from 1 July 2026, 125 days in every financial year for all rural households; MGNREGA repealed from 1 July 2026.
  • The Labour Codes came into force on 21 November 2025, not on their enactment in 2019 and 2020.
  • Disguised unemployment is hidden (people appear to work); open unemployment is visible (no job at all).

Practice Questions

Questions 1-4 are the NCERT exercise MCQs. Practice (UPSC-pattern, not past papers): questions 5-10.

1. The sectors are classified into public and private sector on the basis of:
(i) employment conditions
(ii) the nature of economic activity
(iii) ownership of enterprises
(iv) number of workers employed in the enterprise

Answer: (iii). The public sector is defined by government ownership of most assets.

2. Production of a commodity, mostly through the natural process, is an activity in ___ sector.
(i) primary
(ii) secondary
(iii) tertiary
(iv) information technology

Answer: (i).

3. GDP is the total value of ___ produced during a particular year.
(i) all goods and services
(ii) all final goods and services
(iii) all intermediate goods and services
(iv) all intermediate and final goods and services

Answer: (ii). Counting intermediate goods would count their value twice.

4. In terms of GVA the share of tertiary sector in 2017-18 is between ___ per cent.
(i) 20 to 30
(ii) 30 to 40
(iii) 50 to 60
(iv) 60 to 70

Answer: (iii), from Graph 2. In 2025-26 the share was 54.03% at current prices (NAS 2026).

5. Consider the following statements:
1. GDP is equal to GVA plus net taxes on products.
2. In National Accounts Statistics 2026, the tertiary sector's share of GVA at current prices in 2025-26 is more than half.
3. In India's national accounts, mining and quarrying is part of the secondary sector.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (a). Mining and quarrying is in the primary sector (NAS Statement 8.17.2).

6. With reference to the Periodic Labour Force Survey Annual Report 2025, consider the following statements:
1. Its reference period is January to December 2025.
2. Agriculture's share of workers fell below 40 per cent.
3. The unemployment rate for persons aged 15 and above in usual status was 3.1 per cent.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (c). Agriculture's share was 43.0% in 2025.

7. With reference to the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, consider the following statements:
1. It guarantees 125 days of employment in every financial year for all rural households.
2. The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 stands repealed from the date it came into force.
3. It was enacted in 2026.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (a). It is an Act of 2025; it came into force on 1 July 2026.

8. Which one of the following laws is subsumed in the Code on Social Security, 2020?
(a) Factories Act, 1948
(b) Minimum Wages Act, 1948
(c) Payment of Gratuity Act, 1972
(d) None of the above

Answer: (c). The Factories Act is in the Occupational Safety, Health and Working Conditions Code, and the Minimum Wages Act in the Code on Wages.

9. Five members of a farming family work full-time on a plot that three people could cultivate. If two of them take jobs in a factory, the farm's output stays the same. This is an example of
(a) open unemployment
(b) disguised unemployment
(c) frictional unemployment
(d) voluntary unemployment

Answer: (b). NCERT's test: moving some workers out does not reduce production.

10. "India's output has moved to services, but its workers have not moved out of agriculture." Explain why, using the latest data, and suggest ways to create more jobs outside agriculture. (250 words)

NCERT exercise (fill in the blanks, Q1): (i) has not; (ii) tertiary; (iii) organised; (iv) large; (v) natural, manufactured; (vi) interdependent.

NCERT exercise (match, Q3): 1-(d) canals for unirrigated land; 2-(c) government procurement for low crop prices; 3-(e) cheap bank credit for debt; 4-(a) agro-based mills for the off season; 5-(b) cooperative marketing societies for distress sales soon after harvest.

NCERT exercise (Q5, Surat): The missing share is 50% (100 − 15 − 15 − 20), for workers in small unregistered workshops. Offices and factories registered with the government and own shops or clinics with a formal licence are organised (15% + 15%); street, construction and domestic workers (20%) and unregistered workshops (50%) are unorganised, so 70% of Surat's workers are in the unorganised sector.

NCERT exercise (Q23, Ahmedabad, 1997-98):

WorkersIncome (Rs million)
Organised sector4,00,00032,000
Unorganised sector11,00,00028,000
Total15,00,00060,000

The unorganised sector had about 73% of the workers but earned about 47% of the income.

NCERT exercise (Q24): Shares of GVA, our arithmetic from NCERT's table: 2001-02 primary 30.8%, secondary 24.2%, tertiary 45.0% (total ₹42,94,000 crore); 2021-22 primary 17.9%, secondary 29.3%, tertiary 52.8% (total ₹1,38,77,400 crore). The question's "2000 and 2013" are the old table's years. Conclusion: the primary sector's share fell by about 13 points in twenty years and the tertiary sector passed half.

NCERT exercise (descriptive): odd one out by sector or ownership (Q4); usefulness of the three-sector classification (Q6); why focus on employment and GVA (Q7); how the tertiary sector differs (Q9); disguised unemployment in urban and rural areas (Q10); open vs disguised unemployment (Q11); the two kinds of people in services (Q13: highly skilled workers, and those who barely earn a living); exploitation in the unorganised sector (Q14); the objective of MGNREGA 2005 or VB-G RAM G 2025 (Q17); public sector and development (Q20-21); wages, safety and health in the unorganised sector (Q22).


📦 Revision Capsule

Revision Capsule

Hard Facts

  • Primary = goods from natural resources ("agriculture and related sector"); secondary = manufacturing ("industrial sector"); tertiary = services ("service sector").
  • GDP: value of all final goods and services produced within a country in a year. GDP = GVA + net taxes on products.
  • NCERT's graphs: GVA at 2011-12 prices, 1977-78 and 2017-18; employment (Graph 3) 71/11/18 → 44/25/31.
  • Table 2.3 (late 1990s): 82 million organised of 476 million workers (17.2%); agriculture 99.6% unorganised.
  • MGNREGA, 2005: 100 days, unemployment allowance, at least one-third women beneficiaries; repealed from 1 July 2026.
  • VB-G RAM G Act, 2025: in force from 1 July 2026; 125 days in every financial year for all rural households.
  • Labour Codes: four Codes, 29 laws, in force from 21 November 2025.

Core Concepts

  • Final vs intermediate goods; value added at each stage.
  • Interdependence of the three sectors.
  • Output shifted to services; employment stayed in agriculture.
  • Disguised unemployment: remove workers, output unchanged.
  • Organised vs unorganised: terms of employment, registration, protection.
  • Public vs private: ownership of assets and the motive of profit.

Confused Pairs

  • GDP (includes net taxes on products) vs GVA (by sector, before product taxes).
  • Disguised unemployment (hidden, working below capacity) vs open unemployment (no job).
  • Organised/unorganised (employment conditions) vs public/private (ownership).
  • VB-G RAM G Act year (2025) vs its commencement and MGNREGA's repeal (1 July 2026).
  • Labour Codes enacted (2019, 2020) vs in force (21 November 2025).
  • NCERT's GVA at 2011-12 prices vs NAS 2026 at 2022-23 prices.

Data Points

  • GVA 2025-26, current prices: primary 20.09%, secondary 25.87%, tertiary 54.03% (NAS 2026, provisional).
  • Real GVA growth 2025-26: primary 3.67%, secondary 7.64%, tertiary 9.71%, total 7.91%.
  • PLFS 2025 (January-December): agriculture 43.0% of workers; manufacturing 12.1%; construction 12.0%; unemployment rate 3.1%; regular wage/salaried 23.6%; self-employed 56.2%; 61.6 crore employed.
  • e-Shram: 31.89 crore registrations, women 54.28% (as on 18 August 2026).
  • IMR 2024: Odisha 28, Madhya Pradesh 35, India 24 (SRS 2024).

PYQ Pattern

  • Mains GS3: gs3-pyq-2015-61 (jobless growth), gs3-pyq-2016-41 (globalisation and the shrinking of formal employment), gs3-pyq-2017-32 (industrial growth lagging GDP growth since the reforms), gs3-pyq-2023-01 (manufacturing's share of GDP and MSMEs), gs3-pyq-2023-14 (structural unemployment and how unemployment is computed), gs3-pyq-2024-03 (merits and demerits of the four Labour Codes).

Sources

  • NCERT, Understanding Economic Development, Textbook in Economics for Class X, ch. 2 "Sectors of the Indian Economy", Reprint 2026-27 — ncert.nic.in PDF.
  • NCERT, Understanding Economic Development, ch. 2, 2020-21 edition (file jess202.pdf in the whole-book zip), as archived on 9 October 2021 — Wayback Machine.
  • Ministry of Statistics and Programme Implementation, National Accounts Statistics 2026, Statement 8.17.1 — mospi.gov.in XLSX; Statement 8.17.2 — mospi.gov.in XLSX.
  • Ministry of Statistics and Programme Implementation, Periodic Labour Force Survey Annual Report 2025 (January-December 2025), press note — mospi.gov.in PDF; PIB 2246009.
  • Press Information Bureau, backgrounder on the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, 11 May 2026 — static.pib.gov.in PDF.
  • Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (text with Schedules) — nregaplus.nic.in PDF.
  • Press Information Bureau, Ministry of Labour and Employment, the four Labour Codes made effective, 21 November 2025 — PIB 2192463.
  • Ministry of Labour and Employment, Government of India, Annual Report 2025-26, para 1.3 and the chapters on the Codes (printed report).
  • Press Information Bureau, Ministry of Labour and Employment, e-Shram portal, 25 August 2026 — PIB 2303053.
  • Office of the Registrar General, India, SRS Statistical Report 2024 — censusindia.gov.in PDF.
  • Ministry of Health and Family Welfare, NFHS-6 national results, 29 May 2026 — PIB 2266600.