Unit 2: Sectoral composition of the economy
Indian Economy notes · PTU syllabus (BCOMGE 301-18)
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Unit summary
The three sectors — agriculture, industry and services — together make up the economy. This unit covers issues in Indian agriculture, land reforms, the Green Revolution and agricultural policy, industrial development, MSMEs and cottage industries, industrial policy and the role of the public sector.
After this unit you can
- Explain the problems of Indian agriculture and the role of land reforms
- Evaluate the Green Revolution and agricultural policy
- Explain the role and problems of MSMEs and cottage industries
- Trace industrial policy and the changing role of the public sector
PTU syllabus topics
- Issues in agriculture
- land reforms
- the Green Revolution and agricultural policy
- industrial development
- MSMEs and cottage industries
- industrial policy
- the public sector in India
Primary
Agriculture, mining, fishing
Secondary
Manufacturing, construction, MSMEs
Tertiary
Services: IT, banking, trade, transport
Topic 1
Issues in Indian agriculture
- Supports about 45% of the workforce; provides food, raw materials, exports and a market for industrial goods.
Small and fragmented holdings
Average holding about 1.1 hectares
Dependence on monsoon
About half the area is rain-fed
Low productivity
Yields below world averages
Inadequate credit
Dependence on moneylenders in some areas
Poor marketing
Middlemen, distress sales, storage losses
Soil degradation and water depletion
Over-use of fertilisers and groundwater
Disguised unemployment and low incomes
- Measures: irrigation (PMKSY — "har khet ko pani"), crop insurance (PMFBY), Kisan Credit Card, PM-KISAN income support, e-NAM (national agricultural market), soil health cards, MSP and procurement, FPOs.
Topic 2
Land reforms
Land reforms aim to redistribute land, secure tenancy and remove exploitation.
- 1Abolition of intermediaries
Zamindari abolished in the 1950s
- 2Tenancy reforms
Regulation of rent, security of tenure, ownership rights to tenants
- 3Ceiling on land holdings
Surplus land distributed to the landless
- 4Consolidation of holdings
Combining scattered plots
- 5Digitisation of land records
DILRMP, SVAMITVA property cards
- Assessment: zamindari abolition was largely successful; ceiling and tenancy reforms were weakly implemented (except in Kerala, West Bengal — Operation Barga).
Topic 3
Green Revolution and agricultural policy
The Green Revolution (from 1966–67) introduced high-yielding varieties (HYV) of seeds, chemical fertilisers, pesticides, irrigation and mechanisation — led by M.S. Swaminathan and Norman Borlaug.
| Achievements | Limitations |
|---|---|
| Food self-sufficiency; end of PL-480 imports | Limited mainly to wheat (and later rice) |
| Higher productivity and farm incomes | Concentrated in Punjab, Haryana, western UP |
| Growth of agro-industries | Widened inequality between large and small farmers |
| Buffer stocks for food security | Soil and water degradation, falling water tables in Punjab |
- Agricultural policy: National Agricultural Policy (2000) aimed at 4% growth; focus now on doubling farmers' incomes, crop diversification, natural farming, MSP, FPOs and digital agriculture.
Exam tip
Punjab is the classic case for both the success and the ecological costs of the Green Revolution — use it as your example.
Topic 4
Industrial development, MSMEs and cottage industries
- Industrial development after 1951 was led by the public sector in heavy industries (Mahalanobis strategy, Second Plan); after 1991 the private sector and FDI took the lead.
MSMEs
| Category (since 2020, revised 2025) | Investment in plant and machinery | Turnover |
|---|---|---|
| Micro | Up to ₹2.5 crore | Up to ₹10 crore |
| Small | Up to ₹25 crore | Up to ₹100 crore |
| Medium | Up to ₹125 crore | Up to ₹500 crore |
- Role: about 30% of GDP, around 45% of exports and the second-largest employer after agriculture; promote regional balance, entrepreneurship and use of local resources.
- Problems: finance, delayed payments, outdated technology, marketing, competition from large firms and imports, compliance burden.
- Support: Udyam registration, CGTMSE credit guarantees, MUDRA loans, Emergency Credit Line, TReDS for invoice discounting, public procurement preference (25% from MSEs).
Cottage and village industries
Run by artisans at home with family labour — handloom, handicrafts, khadi, pottery. KVIC, PM Vishwakarma Yojana, ODOP (One District One Product) support them.
Topic 5
Industrial policy and the public sector
- 11948
Mixed economy; four categories of industries
- 21956
Schedule A (17 industries for the public sector), B, C; public sector "commanding heights"
- 31977 and 1980
Small sector focus; liberalisation begins
- 41991
Abolition of licensing (except a few), dereservation, FDI liberalisation, disinvestment
- 52014 onwards
Make in India, PLI schemes, ease of doing business
- New Industrial Policy, 1991: licensing abolished except for a few hazardous/strategic industries; public sector reserved areas cut (now only atomic energy and railway operations); MRTP Act replaced by the Competition Act, 2002; FDI automatic route.
The public sector in India
- Role: infrastructure, heavy industry, employment, balanced regional development, self-reliance, control of the economy's commanding heights.
- Problems: low profitability, political interference, overstaffing, inefficiency.
- Reforms: Maharatna/Navratna/Miniratna autonomy, MoU system, disinvestment and strategic sale (Air India 2022), New Public Sector Enterprise Policy (2021) — minimum presence in strategic sectors, privatisation elsewhere.
Key terms
- Land reforms
- Measures to redistribute land and secure tenancy rights
- Green Revolution
- Rapid rise in food grain output through HYV seeds and inputs
- MSME
- Micro, small and medium enterprise defined by investment and turnover
- Industrial licensing
- Government permission required to set up or expand industries
- Disinvestment
- Sale of government shares in public enterprises
Quick revision
- Agriculture: small holdings, monsoon dependence, low productivity; e-NAM, PM-KISAN.
- Land reforms: zamindari abolition, tenancy, ceilings, consolidation.
- Green Revolution: self-sufficiency vs inequality and ecological costs.
- MSMEs: about 30% of GDP; Udyam, CGTMSE, MUDRA.
- 1991 policy: delicensing, dereservation, FDI, disinvestment.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.State four problems of Indian agriculture.
- Q2.What are land reforms?
- Q3.What was the Green Revolution?
- Q4.Define a micro enterprise.
- Q5.What are cottage industries?
- Q6.State two features of the Industrial Policy of 1991.
Long-answer questions
- Q1.Discuss the problems of Indian agriculture and the measures to solve them.
- Q2.Evaluate the Green Revolution in India.
- Q3.Explain the role and problems of MSMEs in India.
- Q4.Trace the evolution of industrial policy and the changing role of the public sector.
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