Interrelationship between Primary, Secondary and Tertiary Sectors

People are engaged in various economic activities within the economy. There are several ways to group them: primary/secondary/tertiary; organized/unorganized; and public/private. These groups are called sectors.

Primary Sector: There are many activities that are undertaken by directly using natural resources. For example, the cultivation of cotton. Cotton production depends mainly (though not entirely) on natural factors like rainfall, sunshine and climate. So cotton is a natural product. Similarly, in case of activity like dairy, we are dependent on the biological process of the animals and availability of fodder etc. The product milk is a natural product. Minerals and ores are also natural products. When we produce a good by exploiting natural resources, it is an activity of the primary sector. This is because it forms the base for all other products that we subsequently make. Since most of the natural products we get are from agriculture, dairy, fishing, forestry, this sector is also called agriculture and related sector.

Secondary Sector: This sector covers activities in which natural products are changed into other forms through ways of manufacturing that we associate with industrial activity. It is the next step after primary. The product is not produced by nature but has to be made and therefore some process of manufacturing is essential. This could be in a factory, a workshop or at home. For example, using cotton fibre from the plant, we spin yarn and weave cloth. Using sugarcane as a raw material, we make sugar or gur. We convert earth into bricks to make houses and buildings. Since this sector gradually became associated with the different kinds of industries that came up, it is also called as industrial sector.

Tertiary Sector: After primary and secondary, there is a third category of activities that falls under tertiary sector. These activities help in the development of the primary and secondary sectors. But these activities, by themselves, do not produce a good but they are an aid for the production process. For example the goods that are produced in the primary or secondary sector would need to be transported by trucks or trains and then sold in wholesale and retail shops. At times, it may be necessary to store these in godowns. We may also need to talk to people or send letters/mails (communicate) or borrow money from banks to help production and trade. Transport, storage, communication, banking, trade are some examples of tertiary activities. Since these activities generate services rather than goods, the tertiary sector is also called the service sector.

Service sector also includes some essential services that may not directly help in production of goods. For example, we require teachers, doctors and those who provide personal services such as washermen, barbers, cobblers, lawyers and people in administrative and accounting works. In recent times, certain new services based on information technology such as internet café, ATM booths, call centres, software companies etc have become important.

Thus it is clear that the various economic activities, though grouped into three different categories, are highly interdependent. Further examples of economic activities can be cited which shows how the three factors are dependent on each other.

(a) Farmers sell sugarcane to a particular sugar mill. If these farmers refuse to sell sugarcane, the mill will have to close down. This is an example of the secondary (industrial) sector being dependent on the primary sector. The manufacturing sector depends on the primary sector for raw materials.

(b) In turn, the primary sector depends on the secondary sector. One aspect of dependence is the fact that the output of the former is used as inputs in the latter. If fabric manufacturers decided not to buy from the Indian market and import all cotton from abroad, the plight of the Indian cotton cultivators is unimaginable. Indian cotton cultivation will become less profitable and the farmers may even go bankrupt, if they cannot quickly switch to other crops. Cotton prices will fall. The other aspect is that output of the manufacturing sector is used as inputs in agricultural production. For example, farmers buy many goods such as tractors, pumpsets, electricity, pesticides and fertilizers. If the prices of fertilizers or pumpsets go up, cost of cultivation of the farmers would rise and their profits would be reduced.

(c) People working in industrial and service sector get the food that they need from the primary sector. If the farmers decide not to sell their products food will become scarce and workers of the industrial and tertiary sectors will suffer. On the same footing, if there is a strike by transporters and lorries (service sector) refuse to carry vegetables, milk and other food items from the place of their production to the markets, the farmers will be unable to sell their products.

(d) The industrial sector thrives on the services from the tertiary sector and the existence of the service sector would be meaningless if it had no services to render to the other two sectors.

HEALTH CHALLENGES FACED BY THE DEVELOPING COUNTRIES INCLUDING HIV/AIDS

A Report of a study named Disease Control Priorities in Developing Countries (released at the Beijing Second International Medicine Organization Conference on April 3, 2006), identified four key challenges faced by the public health sector in the developing world: the transformation of epidemiology, the HIV/AIDS epidemic, the emergence of new diseases, and high sanitation imbalances among countries. The study, which contains contributions from 500 of the world’s top epidemiologists, sanitation experts, and public health practitioners is a joint effort of the World Health Organization (WHO), the World Bank, and the U.S. National Institutes of Health (NIH).

As a first challenge, the study notes that rapid changes in global health over the past century have contributed to a transformation in disease. Mortality rates worldwide have experienced a remarkable decline in recent decades, a trend that is projected to continue over the next 20 years. “Lifestyle” diseases linked to tobacco and alcohol use and injuries now account for a rising share of deaths, and non-communicable diseases, such as circulatory-system ailments, cancers, and psychiatric disorders, are expected to replace infectious diseases and child malnutrition as the greatest contributors to the global disease burden. Researchers attribute this epidemiological shift primarily to the rapid aging of populations, with senior citizens experiencing the highest rates of non-contagious diseases of any age group.

A second key health challenge cited in the study is the spread of HIV/AIDS. Although the epidemic has been reined in to some extent in middle- and high-income countries, AIDS is expected to remain widespread in developing countries, particularly among high-risk populations. The Worldwatch Institute has reported that in as many as 20 developing countries—nearly all in sub-Saharan Africa—more than 15 percent of the total military force is thought to be HIV-positive. And nearly 74 million workers worldwide could die from AIDS-related causes by 2015.

Emerging and evolving diseases, such as the rapidly spreading avian influenza virus H5N1, will also continue to be a threat, contributing to new global outbreaks, said the study. The severe acute respiratory syndrome (SARS) virus that emerged in China in late 2002 and affected 27 countries illustrated that inadequate surveillance and response capacity in a single country can have repercussions for public health throughout the entire world. Experts believe that whether SARS becomes endemic or not will depend on the post-outbreak surveillance and setup of international mechanisms for outbreak alert and response.

The fourth challenge identified by the study is the need to close the sanitation gap between countries. While global public health inequalities have improved, many developing countries still face severe sanitation challenges that have impeded local economic development and poverty reduction efforts. The study notes that while mortality rates for children under age 5 are declining in most countries, they actually increased in 23 countries between 1990 and 2001 due to breakdowns in the public health infrastructure and the emergence of HIV/AIDS.

The World Bank published the first edition of “Disease Control Priorities in Developing Countries” in 1993, with contributions from the WHO, scholars, and public health practitioners and specialists. In September 2002, the WHO, World Bank, and NIH jointly launched the Disease Control Priorities Project (DCPP) to assess disease control priorities worldwide and to produce science-based analyses and resource materials to inform health policymaking in developing countries. The newly published study is an expanded second edition of the 1993 publication.

(With acknowledgement to Worldwatch Institute.htm - Study Highlights Four Key Health Challenges in Developing Countries; China Struggling With All by Zijun Li on April 11, 2006.)

HEALTH POLICY FOR THE DEVELOPING COUNTRIES

Investment in health constitutes an important component of investment in human capital. The state of health which is considered a stock, depreciates over time and at an increasing rate in later life. Investments in health would broadly include child care, nutrition, clothing, housing, medical services, and the use of one’s own time. “Healthy time” or “sickness-free time” contributes towards work, consumption and leisure activities.

The most important advance in population quality has been the increase in life span of people in low income countries. This reveals improvements in health. Since about 1950, life expectancy at birth has increased 10 percent or more in many LDCs. People of Western Europe and North America never attained so large an increase in life expectancy in so short a period. In India life expectancy at birth of males rose by 43 percent and that of females by 41 percent from 1951 to 1971.

Longer life spans provide additional incentives to acquire more education as investments in future earnings. The additional health capital and other forms of human capital tend to increase the productivity of the workers. Longer life spans result in more years of participation in the labour force and reduces “sick” time. Better health of workers in turn leads to more productivity per man hour at work.

Poverty is the major cause of disease in developing countries and more needs to be done than simple provision of medical facilities to improve health conditions. Reduction in poverty is to be seen as an overall objective of all general development and health policies in these countries. Health policies must be related much more to the environment and to the ecological, cultural and nutritional situation. Health programmes have been biased toward a small section of the urban population, which needs to be changed. Also, treatments should be widespread and ‘preventive’ rather than being ‘curative’.

Malnourishment is a major development problem. The interaction of malnourishment and infection has a far more serious effect on individuals than the combined effect of the two working independently. Consequently, the effects of nutrition actions and health programmes undertaken simultaneously are greater than the sum of their effects on the same populations would be if the actions were undertaken separately. Since integration of nutrition with health services is a particularly efficient way of using limited resources, improved nutrition should be considered an explicit objective in all relevant health work.

Substantial efforts are called forth on the part of governments and other development institutions towards addressing the health challenges being faced by the developing countries. Assistance agencies should emphasize food production, but with increased attention to those foods consumed by low-income groups and further support to projects that help to strengthen the purchasing power of the poor. They can also help government bodies fill gaps to their knowledge. Increased emphasis on nutrition is a logical extension of the effort to increase food production and consumption by those who need it. The food-health policy approach can complement and broaden other work of development-assistance agencies.

SPECIAL DRAWING RIGHTS (SDR)

The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. SDRs are allocated to member countries in proportion to their IMF quotas. The SDR also serves as the unit of account of the IMF and some other international organizations. Its value is based on a basket of key international currencies.

The Special Drawing Right (SDR) was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in world foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets— gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.

Under the amended rules, the activities of the Fund were conducted under two separate accounts. The general transactions of the Fund including the sales of foreign currencies, to member countries, were conducted through the General Account. In other words, the Genral Account dealt with the general drawing rights of the member countries. But with the new scheme, a new account had been opened known as Special Drawing Account. All operations and transactions involving special drawing rights were conducted through the special drawing account. In other words, this account dealt with the special drawing rights of the member countries.

However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.

Today, the SDR has only limited use as a reserve asset, and its main function is to serve as the unit of account of the IMF and some other international organizations. The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions.

SDR valuation

The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, however, the SDR was redefined as a basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-value of the SDR is posted daily on the IMF's website. It is calculated as the sum of specific amounts of the four currencies valued in U.S. dollars, on the basis of exchange rates quoted at noon each day in the London market.

The basket composition is reviewed every five years to ensure that it reflects the relative importance of currencies in the world's trading and financial systems. In the most recent review that took place in November 2005, the weights of the currencies in the SDR basket were revised based on the value of the exports of goods and services and the amount of reserves denominated in the respective currencies which were held by other members of the IMF. These changes became effective on January 1, 2006. The next review by the Executive Board will take place in late 2010.

The SDR interest rate

The SDR interest rate provides the basis for calculating the interest charged to members on regular (non-concessional) IMF loans, the interest paid and charged to members on their SDR holdings, and the interest paid to members on a portion of their quota subscriptions. The SDR interest rate is determined weekly and is based on a weighted average of representative interest rates on short-term debt in the money markets of the SDR basket currencies.

SDR allocations

Under its Articles of Agreement, the IMF may allocate SDRs to members in proportion to their IMF quotas. Such an allocation provides each member with a costless asset on which interest is neither earned nor paid. However, if a member's SDR holdings rise above its allocation, it earns interest on the excess; conversely, if it holds fewer SDRs than allocated, it pays interest on the shortfall. The Articles of Agreement also allow for cancellations of SDRs, but this provision has never been used. The IMF cannot allocate SDRs to itself.

There are two kinds of allocations:

General allocations of SDRs have to be based on a long-term global need to supplement existing reserve assets. General allocations are considered every five years, although decisions to allocate SDRs have been made only twice. The first allocation was for a total amount of SDR 9.3 billion, distributed in 1970-72. The second allocation was distributed in 1979-81 and brought the cumulative total of SDR allocations to SDR 21.4 billion.

A proposal for a special one-time allocation of SDRs was approved by the IMF's Board of Governors in September 1997 through the proposed Fourth Amendment of the Articles of Agreement. This allocation would double cumulative SDR allocations to SDR 42.8 billion. Its intent is to enable all members of the IMF to participate in the SDR system on an equitable basis and correct for the fact that countries that joined the Fund subsequent to 1981—more than one fifth of the current IMF membership—have never received an SDR allocation. The Fourth Amendment will become effective when three fifths of the IMF membership (111 members) with 85 percent of the total voting power accept it. As of end-March, 2008, 131 members with 77.68 percent of total voting power had accepted the proposed amendment. Approval by the United States, with 16.75 percent of total votes, would put the amendment into effect.

(From internet.)

Merits and demerits of SDRs must be studied as well.

Central Assistance to Assam’s Economic Development

An amount of Rs 350 crore has been spent till date on the implementation of the National Rural Employment Guarantee Act (NREGA) schemes in Assam. Schemes under the NREGA have been implemented in all the 27 distircts of Assam.

Under the provision of the Act, 20 lakh families have been provided with job cards and of them, 9 lakh job cardholders have been provided employment, creating more than 2 crore mandays during 2008-09 till September 2008.

Assam received an amount of Rs 71.95 crore in 2008-09 as its first instalment of an allocation of Rs 143.90 crore from the Centre for implementation of the SGSY schemes. Assam has formed 166685 SHGs under SGSY and of them, 102626 are women SHGs.

Of these SHGs, 39225 have been provided with bank loans and subsidy. These SHGs include 21376 women SHGs.

In the rural road sector, under the Bharat Nirman project, the GOI has provided its share to Assam for construction of blacktopped and concrete roads in the villages having more than 1000 habitats in the plains and over 500 habitats in the hilly and tribal areas by 2009. An amount of Rs 6176 crore has been cleared for connectivity to 72 per cent of the total earmarked habitats in Assam. So far, Rs 1894 crore has been spent to construct roads of the length of 4616 kms, connecting 2903 habitations.

(The Assam Tribune, October 21, 2008)