Economic Activities – Geography – UGC NET – Notes

Introduction

Economic activities result in the production of goods and services, while sectors are groups of economic activities classified on the basis of specific criteria. The Indian economy can be classified into various sectors on the basis of ownership, working conditions, and the nature of activities.

In early civilization, all economic activity was confined to the primary sector. With the surplus production of food, the demand for other products increased, leading to the development of the secondary sector. The growth of the secondary sector expanded significantly during the Industrial Revolution of the nineteenth century.

To sustain industrial activity, a support system became essential. Sectors such as transport and finance played a crucial role in supporting and facilitating industrial development.

Concept of Economic Activities

All humans perform a variety of activities on any given day. There is work done daily and other activities performed for personal fulfilment and joy. As a general rule, all activities undertaken to earn a living are economic activities, while all other activities are non-economic activities.

One way to identify economic activities is that they are driven by rationality and logic, and are performed for self-interest. Such activities involve an assessment of returns or rewards. Non-economic activities, on the other hand, are motivated by emotions, concern for others, or moral values. Activities such as religious, charitable, social, patriotic, and recreational activities fall under non-economic activities.

However, it is not always easy to determine the nature of an activity. Painting as a hobby is a non-economic activity, but selling paintings converts it into an economic activity. Thus, the motive behind an activity is the key determinant of whether it is economic or non-economic.

Characteristics of Economic Activities

Characteristics of Economic Activities

Some distinctive characteristics of economic activities are:

1. Income Generation: All economic activities generate some form of income. This income need not always be monetary; it may exist in non-monetary forms. If an activity serves as a means of livelihood and provides any form of income, it qualifies as an economic activity. For example, a labourer who works on land and receives crops as wages is engaged in an economic activity.
2. Productive in Nature: An economic activity must be productive, implying involvement in the production of goods and/or services. Activities such as factory work, software development, teaching, and farming involve production and hence are economic activities. Even production for self-consumption is considered productive as it contributes to the overall supply. Supporting activities like warehousing and transportation, which help deliver goods to the market, are also productive economic activities.
3. Consumption as an Economic Activity: Consumption represents the demand side of the market and drives the production and supply of goods and services. It promotes competition and encourages the introduction of better products. Therefore, consumption itself is an economic activity.
4. Savings, Investment, and Wealth: Savings refer to the portion of income not spent. These savings are invested in instruments such as savings accounts, term deposits, stock markets, mutual funds, real estate, and gold, thereby creating wealth. Both private and public enterprises utilize these funds for investment, further stimulating economic activities.

Classification of Economic Activities

In terms of the national economy, economic activities are classified into the following sectors:

1. Primary Sector (Raw Materials)
2. Secondary Sector (Manufacturing and Industry)
3. Tertiary Sector (Service Sector)
4. Quaternary Sector (Knowledge Sector)
5. Quinary Sector (Decision-Making Sector)