Types of Economic Systems:
- Capitalist Economy:
- the goods produced are distributed between people, not based on what people need but on the basis of Purchasing Power, i.e. the ability to buy goods and services.
- Socialist Economy:
- government choose what goods are to be produced a/c to the needs of society.
- Mixed Economy:
- government and the market together answer the 3 questions:
- what to produce,
- how to build, and
- how to distribute
- In this type, the market will provide whatever goods and services it can deliver well, and the government will provide essential goods and services which the market fails to do.
- India follows a mixed Economy.
- government and the market together answer the 3 questions:
Although India is an agro-based economy but the substantial emphasis has been given on the development of industries (both consumer goods & capital goods), service sector (including construction, trade, commerce, banking system etc.) and socio-economic infrastructure (viz. education, health, housing power, energy, transport, communication etc.).
On the basis of production:
(i) Primary or Agricultural Sector
This sector comprises of agriculture and its allied activities including dairy, poultry, cattle rearing, fishing, forestry, animal husbandry etc. Regarding the primary sector, most of the goods are produced by using natural resources. Since India is an overpopulated agro-based economy, hence, this sector plays an important role in economic growth.
(ii) Secondary or Manufacturing Sector:
This sector is also known as the industrial sector. In this sector, all types of manufacturing sector like large-scale, small-scale and tiny scale are included. Small scale industries include clothes, candle, poultry, matchbox, handloom, toys etc. These units provide huge employment. Whereas large scale industries like iron and steel, heavy engineering, chemicals, fertilizers, shipbuilding etc. contribute a large amount to our gross domestic product.
(iii) Service or Tertiary Sector:
This sector includes different services like transport, communication, banking, insurance, trade and commerce, including both national and international trade. In addition to these, all the professional services like doctors, engineers, teachers, lawyers etc. come under the service sector. Again the services provided by the government for the welfare of citizens are also included in the tertiary sector.
On the basis of Ownership or Organization:
(i) Public Sector:
It consists of all the economic organizations that are controlled and managed by the government. All the government-owned production units comprise the public sector. These units are involved in the production and distribution of goods and services among the common mass with an objective of welfare motives.
(ii) Private Sector:
It comprises of all the economic enterprises which are controlled and managed by the private enterprises. All the privately-owned production units make up the private sector. These units will produce and sell the goods and services to the people with an objective of the profit motive.
On the basis of habitation:
(i) Rural Sector:
According to M.K. Gandhi, “India lives in villages”. About 65% of the total population in India reside in rural areas. The main occupations of the people of this sector are agriculture and allied activities.
(ii) Urban Sector:
One-third of the total population in India live in the urban sector. It consists of towns and cities. People residing in this sector are mainly engaged in either secondary sector or tertiary sector.
Understanding Economics:
- Economics is the study of how people in a system allocate scarce resources for the purpose of production, distribution, and consumption, both individually & collectively.
- 2 major types of economics are:
Microeconomics: focuses on the behaviour of individual consumers and producers, & Macroeconomics: examines the overall economies on a regional, national, or international scale.
Microeconomics vs Macroeconomics
Microeconomics | Macroeconomics |
It is the study of economics at an individual, group or company level. | It is the study of a national economy as a whole. |
Its emphasis on issues that affect individuals and companies, i.e. studying the supply and demand for a specific product, the production that an individual ‘or’ business is capable of, or the effects of regulations on business. | It focuses on issues that affect the economy as a whole and include unemployment rates, the gross domestic product(GDP) of an economy, and the effects of exports and imports. |
India’s Sector wise GDP Contribution:
Share of sectors in GVA at current prices (%) | ||||
Sector | 2015-16 | 2016-17 | 2017-18 | 2018-19 |
Agriculture, forestry & fishing | 17.7 | 17.9 | 17.1 | 15.87 |
Industry(Manufacturing) | 29.8 | 29.3 | 29.0 | 29.73 |
Services | 52.5 | 52.8 | 53.9 | 54.40 |
Distribution of the workforce across economic sectors:
Sector | 2015-16 | 2016-17 | 2017-18 | 2018-19 |
Agriculture, forestry & fishing | 45.12% | 44.52% | 43.86% | 43.21% |
Industry(Manufacturing) | 24.29% | 24.47% | 24.69% | 24.89% |
Services | 30.59% | 31.01% | 31.45% | 31.90% |
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