Types of Economic Activities

Generally there are three types of economic activities — primary, secondary and tertiary.

Primary Activity: It is concerned with production of raw materials for industrial use and for food stuffs. Agriculture, forestry, fishing, mining are termed as Primary Activity.

Secondary Activity: The economic activity undertaking production, processing arid manufacture, of primary products into finished or useful goods is termed as Secondary Activity. Thus all types of manufacturing activities can be regarded as secondary industries. In manufacturing goods products are made more useful and value is added. Value addition is thus the chief characteristic of secondary activity It is this value addition that not only changes the form and utility of goods but also increases national wealth.

Tertiary Activity: It acts as a link between primary and secondary activity as well as link between consumers and producers. It is basically concerned with distribution of goods. All types of transport, communication, banking, financing, education, consultancy etc. can be termed a Tertiary Activity.

India was perhaps the earliest civilization in the world engaged in industry. Fine quality cotton, pottery, jewellery etc. was manufactured during Indus Valley Civilization. However, on account of foreign invasions, there was a long period of disruption. Industrial activity again took off only after Independence in 1947. Start of modem industry had been made during the British rule itself. In 1854 the first cotton textile mill was established in Mumbai. After Independence the Government of India formulated the five year plans. Industrial development was included in the plans. The Industrial Policies of 1948 and 1956 provided certain direction for industrial development. It is under this process that structural reforms are being carried out since 1990s.

Recent Reforms

Chief features of reforms in industry in India are the following:

Liberalisation : in earlier planning process Government also took initiative to establish industries. As a result a significant number of industries were reserved for government sector known as public sector. With large number of industries already established, there is changed atmosphere today. There is now a trend towards giving greater encouragement to private sector for establishment of industries. Its chief characteristic are the strength and maturity of the industry stimulate competition to stabilise prices and improve quality In order to benefit the liberalisation process, New Industrial Policy (1991) proposed to make industrial licensing more flexible to remove many unnecessary controls as well as enforce greater degree of responsibility on private sector. This was done through not only giving tax concessions or easing regulations but in a variety of other important ways. Private sector participation is being sought in construction of roads, setting up power plants, undertaking manufacture of vital defense equipment arid even in nuclear installations.

Foreign Direct Investment: Another chief feature of reforms is encouragement given to inviting foreign investment in vital sectors of the economy. Known as Foreign Direct Investment or FDI, its chief objective is to stimulate economic development and achieve higher level of growth. It can result in technological upgradation as well as establishing large scale industries to bring down prices to benefit consumer. It will also help in making Indian industry more competitive and promote exports.

Expanded concept of Swadeshi: Swadeshi during the freedom struggle was started as a means of achieving self-reliance. It was also used as a weapon to hit British industry. Now the concept involves making Indian economy more competitive in the world market or simply selling Swadeshi in the world market. It can best be described in the words of Prime Minister Atal Behari Vajpayee:

“We have to expand the concept of swadeshi and make it self reliant. In an open economy, the state cannot impose ban, as this is not the Permit Raj. The state will control the economy only in extreme situations, like severe drought.”

The expanded concept of Swadeshi is very much in conformity with Globalisation discussed earlier under Institutional Reforms in Agriculture.

There are many other features of new industrial policy. The basic question faced in establishment of industry is its location. It is concerned with the questions like ‘where’, ‘when’ and ‘which’ industry to establish. Therefore, location of industry is very important consideration.