Question

Explain the role of tertiary sector in an economy.

Hint:

Explain that tertiary activities support the other two sectors rather than producing goods. Cover transport, storage, trade, communication and banking, the basic services, the growth of demand with income, and note that it is now the largest producing sector in India.

Answer 1

Concept:

• Tertiary activities do not produce a good, but they are an aid or a support for the production process, which is why this sector is also called the service sector.
• Transport, storage, communication, banking and trade are the main examples, along with services such as teaching, medicine and administration.

Step 1: It makes production in the other two sectors possible.
Goods produced in the primary and secondary sectors need to be transported by trucks or trains, stored in godowns, and sold in shops. Traders have to talk to producers by telephone, and money has to move through banks.
Without these services, farming and industry could not function at all.

Step 2: It supplies the basic services every society needs.
Hospitals, educational institutions, post and telegraph services, police stations, courts, village administrative offices, municipal corporations, defence, banking, insurance and transport are all tertiary activities.
These are the services a government is expected to provide, and their quality decides the quality of life.

Step 3: Demand for services grows as incomes rise.
As income levels rise, people begin to demand more services such as eating out, tourism, shopping, private hospitals, private schools and professional training.
This is why the share of the tertiary sector grows as a country develops.

Step 4: New services based on technology have grown fast.
Over the past decade services based on information and communication technology have become important. The production of these services has been rising rapidly, and they bring in substantial foreign exchange.

Step 5: It has become the largest producing sector in India.
Over the forty years between 1973 and 2013 the production in the tertiary sector rose the most, and it has now overtaken the primary sector as the largest producing sector in India.
It must be remembered, however, that not all service jobs are of the same kind. Many people work as small shopkeepers, repair persons or casual workers at very low earnings, so growth in output has not always meant good employment.

Final Answer: The tertiary sector supports production in the other two sectors through transport, storage, trade, communication and banking, supplies the basic services of health, education and administration, grows with rising incomes, and has become the largest producing sector in India, though the quality of employment within it varies greatly.