Knowing the sectors of the economy and how they contribute to GDP will give you a full picture of the economics of the nation. A nation's economy is divided into three main sectors: the primary sector, which includes agriculture and related industries, the secondary sector, which includes manufacturing, and the tertiary sector, which includes services. The many stages of production in an economy are referred to as the primary and secondary sectors, two broad areas of economic activity. The tertiary sector includes all activities like education, healthcare, banking, insurance, and other activities involving the provision of services to people. While the secondary sector refers to activities that involve the manufacturing and processing of these raw materials into finished goods, the primary sector refers to activities that involve the extraction and production of raw materials. The primary and secondary serve as a representation of the various production phases needed to produce final goods and services, and they are essential elements of any economy. The secondary sector is involved with taking these raw resources and changing them into completed commodities that can be sold to consumers. The primary sector is primarily concerned with extracting raw materials from the natural environment.
Primary Sector vs. Secondary Sector
The amount of value that is added to raw materials as they produce through the production process is one of the main differences between the primary and secondary sectors. The price of raw materials is often quite low in the primary sector, whereas the price of finished goods can be very expensive in the secondary sector. A ton of iron ore, for instance, might only be worth a few dollars in the primary sector, but it might be worth hundreds of dollars in the secondary sector when it is processed and made into steel.
Differences Between Primary Sector and Secondary Sector
|PARAMETERS||PRIMARY SECTOR||SECONDARY SECTOR|
|Meaning||The term primary sector describes a sector in which natural resources are exploited to produce commodities and services.||The term secondary sector describes the area of the economy that uses a more useful manufacturing technique to turn raw resources into finished items.|
|Includes||The primary sector includes all agriculture and allied activities, for example, forestry, fishing, mining, quarrying, etc.||This sector is also known as the manufacturing sector and it includes all types of industries|
|Production of goods||It produces goods by exploiting natural resources such as Land, water, forests, mine, etc.||The manufacturing sector converts one type of commodity into another. For example, the manufacturing of cotton cloth from cotton yarn, sugar from sugarcane, etc.|
|Dependence on each other||Farmers buy many goods such as tractors, fertilizers, equipment, etc., from the secondary sector. Thus, it shows the dependence of the primary sector on the secondary sector.||Similarly, the manufacturing sector needs raw materials such as cotton yarn, sugar from sugarcane, etc.|
|Important component||Agriculture, a part of the primary sector, is the largest sector in terms of the workforce it employs and plays the most important role.||Manufacturing is one of the important components of the secondary sector- and employs a large number of workforce.|
What is Primary Sector?
The earliest stage of production in an economy is the primary sector. It entails taking raw materials out of the soil or other natural resources and gathering them. Agriculture, fishing, forestry, mining, and oil and gas extraction are all included in this industry.
As it relates to activities involving the use of the earth’s resources, such as water, land, wind, vegetation, materials, and minerals, the primary sector can be characterized as that economic sector that solely depends on the environment. As a result, we may conclude that this industry is highly dependent on the accessibility and availability of natural resources. The primary sector consists of companies that have one of their main goals be the direct extraction and exploitation of natural resources. This could involve harvesting directly from the wild, growing crops, raising domesticated animals, hunting and gathering, logging and forestry, mining for minerals and fuels, or using non-renewable energy sources from the environment.
According to estimates, this industry employs the most people, particularly in emerging nations. Depending on the level of development, the types of machinery employed in this industry might be anything from light to heavy. Advanced methods and large machinery are frequently used in developed economies to boost productivity and lower the number of workers needed. However, the primary sector continues to play a significant role in the economy even in developed nations because it supplies the raw materials required for the secondary sector to function.
Compared to lower-tech methods in poorer or under-developed countries, the primary sector has become more technologically advanced in industrialized countries, enabling, for instance, the mechanization of farming. For instance, in the corn belt of the United States, combine harvesters pick the corn while sprayers liberally apply insecticides, herbicides, and fungicides to produce a higher yield than is possible with less capital-intensive methods. More developed countries may invest additional capital in primary production methods. The primary sector may now employ a smaller workforce thanks to technical advancements and investment, hence developed nations often have a lower proportion of their workforces engaged in primary activities and a higher proportion in the secondary and tertiary sectors.
According to International Monetary Funds, the largest country in terms of agricultural outcome is China (2101 Billion in USD) followed by India (1400 Billion in USD) and the smallest is Malaysia (84 Billion in USD) with the base year taken as 2018 and measured in terms of PPP.
Benefits of the Primary Sector
- Provides Essential Resources: Basic needs such as food, water, and the raw materials for clothes, shelter, and other necessities are all met by the primary sector. This industry is responsible for providing these necessities.
- Create Job Opportunities: The primary sector provides work in agriculture, forestry, fishing, and mining, and it accounts for a sizeable portion of employment in many countries.
- Contributes to the Economy: The primary sector has a big influence on the economy since it generates money through the sale of minerals and other raw resources.
What is the Secondary Sector?
The second stage of manufacturing is known as the secondary sector in an economy. It entails the production of final things from raw resources. The manufacturing, construction, and energy production sectors are all included in this group. The economic activities that result in finished, ready-to-use items are under the secondary sector of the economy. Businesses in the secondary sector specialize in “manufacturing” so they use the primary sector’s output as input, i.e., raw materials and supplies, and process it to the point where it can be used by other business entities for further processing, export, selling to domestic customers, or as an intermediate good that aids in the production of other products. This industry is renowned for increasing the value of natural resources by turning inputs into goods that consumers want to buy. Construction, engineering, and manufacturing are all included.
This sector's industries are divided into heavy and light industries:
- Heavy Industries: Steel production, chemical and engineering operations, vehicle and shipbuilding, aircraft production, metalworking, and other heavy industries are all included in this category.
- Light Industries: Light industries are those involved in the manufacturing of goods like textiles, food, cosmetics, and home electronics, among others.
Substantial machinery, equipment, a significant amount of energy, and raw materials are needed to complete the process to produce the output, but substantial waste is also created in the process.
The primary sector’s manufacturing sector is very significant. Products like cars, appliances, and electronics are among the products produced in this industry. Due to its role in the construction of residences, workplaces, and other structures, construction is a significant secondary sector business. Production of energy, which includes the creation of electricity, oil, and natural gas, is another important activity in the secondary sector.
Due to their propensity to have more established manufacturing and construction sectors than emerging countries, industrialized nations are often linked with the secondary sector. However, as nations work to industrialize and advance up the value chain, the secondary sector is becoming more significant even in developing nations. A greater degree of education and more specialized skills are often required than in the primary sector. Even though the secondary sector is typically associated with developed nations, developing nations are also attempting to grow their manufacturing and construction sectors to advance up the value chain and advance their economies.
Benefits of the Secondary Sector
- Completed Goods: The secondary sector creates the finished goods required for contemporary life, such as automobiles, electronics, and home appliances.
- Jobs are Created: The secondary sector employs many people in the construction, manufacturing, and other industries, offering employment to people with a variety of talents and educational backgrounds.
- Drives Innovation: The secondary sector is frequently at the forefront of technical advancement, creating new goods and production techniques that increase productivity and efficiency.
- Contributes to the Economy: By making money from the sale of finished goods and services, the secondary sector makes a considerable contribution to the economy.
Main Differences Between Primary Sector and Secondary Sector in Points
- The primary sector includes all operations that involve harvesting or using natural resources to produce goods. The Secondary Sector, on the other hand, includes all of the activities connected to the manufacturing processes that change natural materials into a variety of forms.
- Due to the ambiguous and irregular nature of the employment conditions, the primary sector is classified as an unorganized sector. Contrarily, the secondary sector is categorized under the organized sector because of the consistency and predictability of employment.
- Depending on the economy’s level of development, the primary sector frequently employs either conventional or cutting-edge approaches. The secondary sector, on the other hand, processes and transforms the items using contemporary, scientific methods.
- Agriculture, dairy, mining, quarrying, fishing, forestry, logging, animal husbandry, grazing, hunting, and collecting are all included in the category of primary sectors. The activities that are part of the secondary sector, on the other hand, include manufacturing, production, processing, and conversion of goods, trade and commerce, engineering, refining, transport, and communication.
- Unskilled laborers make up the majority of the workforce in the primary sector. The secondary sector, in contrast, employs both skilled and unskilled laborers.
- Employees in the primary sector are referred to as red-collar employees, while those in the secondary sector are referred to as blue-collar workers.
- Because it includes a variety of activities like design, engineering, production, and marketing, the secondary sector is typically more diverse and complex than the primary sector.
- The amount of value that is added to raw materials as they proceed through the production process is one of the main distinctions between the primary and secondary industries. The price of raw materials is often quite low in the primary sector, whereas the price of finished goods can be very expensive in the secondary sector.
- The value of the raw materials is increased more by the secondary sector than by the primary sector. A piece of wood, for instance, might only be worth a few dollars in the primary sector, but after it is processed and made into furniture, it might be worth hundreds or even thousands of dollars there.
- Generally speaking, developing countries are associated with the primary sector, while developed countries are often connected with the secondary sector. Developing nations frequently rely more heavily on the primary sector, whereas industrialized nations frequently rely more heavily on the secondary sector.
We've spoken about how the two economic sectors are different so far, but you should realize that because of their interdependence, they are complementary rather than contradictory. Farmers rely on the secondary sector for their tractors, equipment, fertilizers, and other supplies. Large-scale companies also purchase raw materials from farmers, such as sugarcane, timber, and cotton yarn, demonstrating their reliance on the primary sector. The main and secondary sectors are two large categories of economic activity that are used to define the different stages of production in an economy. While the secondary sector deals with manufacturing, the primary sector deals with the extraction and production of raw materials. To sum up, the economy and society as a whole gain greatly from both the primary and secondary sectors.