Wednesday, 6 January 2016

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 :-

  1. Agrarian Economy :- An economy is called agrarian if the share of its primary sector is 50 % or more in the total output ( the GDP) of the economy. At the time of independence, India was such as economy. But now it show the typical symptom of a service economy with primary sector's contribution falling to almost 18% of its total produce while almost 60% 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 to the economic history of the world.
  2. Industrial Economy :- If the secondary sector contributes 50% 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 economies. Most of these economies have crossed this phase once the process of industrialisation saturated.
  3. Service Economy :- The economy whose 50 % 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 service  sector, whose contribution to overall growth of the economy has been 65%, while that of the industry and agriculture sectors has been 27% and 8% respectively.
By the end of the 19th 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 Woeld 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. 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% of 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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