TYPES OF ECONOMIES
Depending upon the shares of the particular sectors in the total production of an economy and the ratio
of the dependent population on them for their livelihood, economies are given different names, such
as:
(i) Agrarian Economy
An economy is called agrarian if the share of its primary sector is 50 per cent or more in the total
output (the GDP) of the economy. At the time of independence, India was such an economy. But now
it shows the typical symptom of a service economy with primary sector’s contribution falling to
almost 18 per cent of its total produce while almost 60 per cent of its population depends on the
primary sector for its livelihood. Thus, in monetary terms India is no more an agrarian economy, the
dependency ratio makes it so—India being the first such example in the economic history of the
world.
(ii) Industrial Economy
If the secondary sector contributes 50 per cent or more to the total produce value of an economy, it is
an industrial economy. Higher the contribution, higher is the level of industrialisation. The western
economies who went for early industrialisation earning faster and enough income and developing
early were known as developed economies. Most of these economies have crossed this phase once
the process of industrialisation saturated.
(iii) Service Economy
The economy whose 50 per cent or more produce value comes from the tertiary sector is known as
the service economy. First lot of such economies in the world were the early industrialised
economies. The tertiary sector provides livelihood to the largest number of people in such
economies. In the last decade (2003-04 to 2012-13), growth has increasingly come from the services
sector
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, whose contribution to overall growth of the economy has been 65 per cent, while that of the
industry and agriculture sectors has been 27 per cent and 8 per cent respectively.
By the end of the 19
th century it was a well-established fact, at least in the western world, that
industrial activities were a faster way to earn income in comparison to agrarian activities. The
Second World War had established the fact for the whole world—and almost every country started
their preparation for the process of industrialisation. As country after country successfully
industrialised, a pattern of the population shift from one to another sector was established, which was
known as the stages of growth of an economy.
7 With the intensification of industrialisation,
dependency on primary sector for livelihood decreased and dependency on secondary sector
increased consistently. Similarly, such economies saw a population shift from the secondary to the
tertiary sector—and these were known as the ‘post-industrial’ societies or the service societies.
Almost the whole Euro-America falls under this category—these economies are having over 50 per
cent of their total produce value being contributed by their tertiary sectors and over half of the
population depends on the sector for their livelihood. Many other countries which started
industrialisation in the post-war period did show abberations in this shift of the population and the
income—India being one among them.
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