How are the three sectors of economy interdependent?
The three sectors of economy are interdependent upon each other in the following ways:
- The primary sector provides the base for all economic activities as it involves production at the most basic level, i.e. through exploitation of natural resources. This includes agriculture, horticulture, fisheries, forestry, mining, etc.
- The goods that are produced are converted into processed forms through manufacturing. It is the secondary sector of the economy. This sector depends upon primary sector for raw materials and in turn, provides a market for the producers of primary sector.
- The tertiary or service sector provides support to the process of production. It includes transportation, storage, marketing and sale of products. Other services include communication and banking. These sectors are necessary to aid production while themselves deriving their sustenance from it.
Thus, it can be concluded that all three sectors of the economy are interdependent upon each other.
When the economic activity depends mainly on exploitation of natural resources then
that activity comes under the primary sector. Agriculture and agriculture related
activities are the primary sectors of economy.
When the main activity involves manufacturing then it is the secondary sector. All
industrial production where physical goods are produced come under the secondary
When the activity involves providing intangible goods like services then this is part of
the tertiary sector. Financial services, management consultancy, telephony and IT
are good examples of service sector.
Evolution of an Economy from Primary Sector Based to Tertiary Sector
During early civilization all economic activity was in primary sector. When the food
production became surplus people's need for other products increased. This led to
the development of secondary sector. The growth of secondary sector spread its
influence during industrial revolution in nineteenth century.
After growth of economic activity a support system was the need to facilitate the
industrial activity. Certain sectors like transport and finance play an important role in
supporting the industrial activity. Moreover, more shops were needed to provide
goods in people's neighbourhood.
Ultimately, other services like tuition, administrative support developed.
Interdependency of Sectors:
To understand this interdependency, let us take an example of a cold drink. A cold
drink contains water, sugar and artificial flavour. Suppose if there is no sugarcane
production then procuring sugar will become difficult and costly for the cold drink
manufacturer. Now to transport sugarcane to sugar mills and sugar to the cold drink
plant needs the services of a transporter. A person or system of persons is required
to maintain and monitor all these movements of goods from farm to factory to shop
in different locations. That is where role of administrative staffs comes. Let us go
back to the farmer. He also needs fertiliser and seeds which is processed in some
factory and which will be delivered to his doorstep by some means of transportation.
To top it all at every step of these activities we require the proper monetary and
banking system. So, in a nutshell this describes how interrelated all sectors of an