Different types of sectors in an economy


A sector is one of a few general segments in the economy within which a large group of companies can be categorized. An economy can be broken down into about a dozen sectors, which can describe nearly all of the business activity in that economy.

Sectors of Economic Activities

Broadly, the four main sectors in an Economy are:

  1. Primary sector
    • This sector deals with the extraction and harvesting of natural resources.
    • These can be renewable resources, such as fish, wool and wind power. Or it can be the use of non-renewable resources, such as oil extraction, and mining for coal.
    • In developing economies, the primary sectors tends to take a big share with many employed in agriculture and mining.
    • However, improved technology and the growth of nation, results in decline of share in this sector.
  1. Secondary sector
    • This sector makes and distributes finished goods, and can include:
      • Manufacturing – e.g. producing cars from aluminium.
      • Construction – building homes, factories
      • Utilities – providing goods like electricity, gas and telephones to households
    • Basically, this sector comprises industries that relate to the production of finished goods from raw materials.
  1. Tertiary Sector
    • This is the service sector, which is concerned with the intangible aspect of offering services to consumers and business.
    • Retailers, entertainment, and financial companies make up this sector.
  1. Quaternary/knowledge sector
    • This sector deals with knowledge or intellectual pursuits including research and development (R&D), business, consulting services, and education.
    • It is the process which enables entrepreneurs to innovate better manufacturing processes and improve the quality of services offered in the economy.
    • Without this growth of technology and information, economic development would be slow or non-existent.
  1. Quinary sector
    • This sector is the part of the economy where the top-level decisions are made.
    • This includes the government which passes legislation.
    • It also comprises the top decision-makers in industry, commerce and also the education sector.

Historical Change in Sectors

  • Generally, it has been noted from the histories of many, now developed, countries that at initial stages of development, primary sector was the most important sector of economic activity.
  • Over a long time (more than hundred years), and especially because new methods of manufacturing were introduced, factories came up and started expanding. Those people who had earlier worked on farms now began to work in factories in large numbers.
    • As a result, Secondary sector gradually became the most important in total production and employment.
  • In the past 100 years, there has been a further shift from secondary to tertiary sector in developed countries. The service sector has become the most important in terms of total production. This is the general pattern observed in developed countries.


Sector wise contribution in India

  • In India, the share of primary, secondary and tertiary sectors have been estimated as 21.82 percent, 24.29 percent, and 53.89 percent respectively.
  • The services sector is the largest sector of India.
    • It accounts for 53.89% of total India’s GVA.
  • It is to be noted that, the Agriculture sector’s contribution to the Indian economy is much higher than the world’s average (6.4%).
  • Further, the industry and services sector’s contribution is lower than the world’s average – 30% for the Industry sector and 63% for the Services sector.



Sectors in terms of Ownership

  1. Public Sector
    • In this, the government owns most of the assets and provides all the services.
    • Railways or post office is an example of the public sector.
    • The purpose of the public sector is not just to earn profits. Governments raise money through taxes and other ways to meet expenses on the services rendered by it.


  1. Private Sector
    • In this, ownership of assets and delivery of services is in the hands of private individuals or companies.
    • Example: companies like Tata Iron and Steel Company Limited (TISCO) or Reliance Industries Limited (RIL) are privately owned.
    • Activities in the private sector are guided by the motive to earn profits.


Sectors on basis of Work Condition

  1. Organised Sector
    • In this sector, employment terms are fixed and regular, and the employees get assured work and social security.
    • It is a sector, which is registered with government and certain acts apply to the enterprises.
    • This sector provides security of employment.


  1. Unorganised Sector
    • This sector refers to a home-based worker or a self-employed worker or a wage worker in the unorganized sector.
    • Further, it includes a worker in the organized sector who is not covered by any of the Acts pertaining to welfare Schemes as mentioned in Schedule-II of Unorganized Workers Social Security Act, 2008.
    • This sector is marked by low incomes, unstable and irregular employment, and lack of protection either from legislation or trade unions.