To know and understand the nature of Indian economy, it is very necessary to have a clear idea about the meaning of Indian economy.

After Independence India launched her First Five Years plan in 1950-51; then now 5-Year Plan is going on.

Although India is an agro-based economy, but lot of emphasis has been given on the development of industries (both consumer goods and capital goods), service sector (including construction, trade, commerce, banking system etc.) and socio-economic infrastructure (like education, health, housing power, energy, transport, communication etc.).

Both central and state governments in India join their hands in all the spheres leading to economic development.


On the basis of production:

Indian economy can broadly be divided into three heads:

(i) Primary or Agricultural Sector:

This sector consists of agriculture and its allied activities including dairy, poultry, cattle rearing, fishing, forestry, animal husbandry etc. In the primary sector, most of the goods are produced by using natural resources, since India is a overpopulated agro based economy, therefore, this sector plays an important role for economic growth.


(ii) Secondary or Manufacturing Sector:

This sector is also known as industrial sector. In this category, all types of manufacturing sector like large scale, small scale and tiny scale are included. Small and tiny scale industries include clothes, candle, poultry, match box, handloom, toys etc. These units provide huge employment. On the other hand, large scale industries like iron and steel, heavy engineering, chemicals, fertilizers, shipbuilding etc. contribute a huge amount in our gross domestic production.

(iii) Service or Tertiary Sector:

This sector produces different services like transport, communication, banking, insurance, trade and commerce, including both national and international trade. Moreover, all the professional services like doctors, engineers, teachers, lawyers etc. come under service sector. Again the services provided by the government itself for the welfare of citizens are also included in the tertiary sector.


On the basis of Ownership or Orga­nization:

Indian economy can be broadly divided into two heads:

(i) Public Sector:

It consists of all the economic organizations which are controlled and managed by the government. All the government-owned production units come under this head. These units produce and distribute goods and services among the common mass with an objective of welfare motives.

(ii) Private Sector:

It consists of all the economic enterprises which are controlled and managed by the private enterprises. All the privately owned production units are come under this head. These units will produce and distribute goods and services among the people with an objective of profit motive.

On the basis of habitation, Indian economy can again broadly be divided into two heads:

(i) Rural Sector:

According to M.K. Gandhi, “India lives is villages”. About three-fourths of total population in India lived in the rural sector. The main occupations of this sector are agriculture and allied activities.


(ii) Urban Sector:

One-fourth of the total population in India lived in the urban sector. It consists of towns and cities. People living in this sector are mainly engaged in either secondary sector or tertiary sector.