Economic Sectors of Production

The economy is mainly divided into three basic sectors - primary sector, secondary sector and tertiary sector. National income is related to the three sectors. The Central Statistical Office (CSO) categorizes economic activities into primary, secondary and tertiary sectors and calculates national income.

Primary Sector

The sector that involves the direct use of natural resources is known as Primary Sector. The foundation of Primary Sector is known as Agriculture. Since agriculture is more important, the primary sector is also known as the agricultural sector. The agricultural sector is the backbone of the Indian economy. The primary sector is the sector that provides the most employment opportunities in the primary, secondary and tertiary sectors. The classification of CSO based on activities in the primary sector - Agriculture and allied activities, forestry, fishing, mining, and production of raw materials.

Secondary Sector

The Secondary Sector is the sector where activities are carried out to make new products using the products of the primary sector as raw materials. The foundation of the Secondary Sector is industry. Secondary Sector is also known as Industrial Sector because of its importance to industry. Classification of CSO based on activities in Secondary Sector - Industry, Power Generation, Construction, Manufacturing.

Tertiary Sector

The tertiary sector is the sector that stores and distributes the products of the primary and secondary sectors. The tertiary sector contributes the most to the Indian economy. The tertiary sector is also known as the service sector. The service sector includes education, transport, banking, IT, etc. The tertiary sector is the sector that combines all service activities. The tertiary sector contributes the most to the national income. Classification of CSO based on activities in Tertiary Sector - Trade, Commerce, Transport, Hotels, Communication, Storage, Banking, Education, Insurance, Business, Real Estate, Social Service Activities.

Economic Activities

Economic activities are the income-generating activities of humans. Economic activities are divided into primary activities, secondary activities, tertiary activities, quaternary activities, and quinary activities.

Primary Activities

Primary activities are activities that are directly related to nature by utilizing natural resources such as land, water, plants, and minerals. Examples - hunting, gathering food, grazing, fishing, forestry, agriculture, mining, quarrying, etc. In the early stages of economic development, most of the people worked in the primary sector. People who were engaged in primary activities are called red-collar workers. Hunting and gathering is the oldest known economic activity.

Secondary Activities

Secondary activities are activities related to production, processing, and manufacturing. Industries are geographically concentrated production units that are managed and maintain records and accounting books. Modern industries are concentrated and flourishing in less than 10 percent of the world's total area. 

Agglomeration economy - The proximity of a major industry and other industries to each other often benefits many industries. This is known as an agglomeration economy. The interconnectedness of industries/the accumulation of economies is known as an agglomeration economy. Investments are generated from the relationships that exist between different industries.

Tertiary Activities

The sectors that require professional skills are health, education, law, administration, and entertainment. The main component of the service sector is human power. The tertiary sector, where most workers in a developed economy work, includes production and exchange. Trade, transport, and communication are included in exchange. Services of teachers and doctors, and trade, transport, and communication services are various types of tertiary activities. Tourism is the largest tertiary economic activity in the world. International tourism combined with medical care is generally known as medical tourism. Knowledge-based sector is also falls under Tertiary Activity. A category related to knowledge in the service sector can be divided into two categories: Quaternary activities and Quinary activities.

Knowledge-based sector: The tertiary sector is the sector that effectively applies knowledge and technology to achieve economic growth. Education, application of advanced technologies, information and communication technology, etc. are the basis of the knowledge economy. Intellectual capital is the collective knowledge of the people in an enterprise or society. Intellectual capital is an intangible asset. Example: Technopark and Infopark started by the Kerala government are examples of knowledge-based sectors

Quaternary Activities

This service sector includes workers in office buildings, elementary schools, university classrooms, hospitals, doctors' offices, theaters, and accounting brokerage firms. Quaternary activities are those that can be outsourced. These activities are not influenced by the environment or determined by markets because they are not directly related to resources. Quaternary activities include the collection, production, and dissemination of information. Characteristics of quaternary activities - Quaternary activities are focused on research and development. These are highly advanced services that require specialized knowledge and technical expertise.

Quinary Activities 

The Quinary activities refer to the activities of decision-makers and policymakers at the highest levels. These are slightly different from knowledge-based industries. The services that focus on the formation, reorganization, analysis, and evaluation of existing and innovative ideas, and the use and evaluation of new technologies are concentrated in Quinary activities. These are known as Golden Collar Professions and are a subset of the tertiary sector. The Quinary Sector includes senior business executives, government officials, research scientists, and financial and legal advisors with specialized job skills that are highly paid. Knowledge Process Outsourcing - KPO and Home Shoring are new trends in Quinary sector services. Home shoring is an alternative to outsourcing. Outsourcing is the process of outsourcing work to an external agency to improve efficiency and reduce costs. Off shoring is the process of transferring outsourced work to a location outside the country. The Knowledge Process Outsourcing industry is quite different from the Business Process Outsourcing industry. Knowledge Process Outsourcing is information-based. Examples of Knowledge Process Outsourcing include research and development, e-learning, business research, intellectual property research, legal practice, and banking.