Tertiary sector

Chapter 7
Tertiary Sector

The tertiary industry is the segment of the economy that

provides services to its consumers, including a wide range
of businesses such as financial institutions, schools and
restaurants. It is also known as the tertiary sector or
service industry/sector.
Role of following Sectors :

– Education and healthcare

– Transportation
– Banking
– Insurance
– Communication
– Storage and warehousing
Role of Banking

– The Indian banking industry plays an important role in the economic

development of the country and is the most dominant segment of the
financial sector. Banks help channel savings to investments and
encourage economic growth by allocating savings to investments that
have potential to yield higher returns.
1.Removing the deficiency of capital formation In any economy, economic development is not
possible unless there is an adequate amount of capital formation. The serious capital deficiency in
developing Countries is removed by banks. A sound banking system mobilizes small savings of the
community and makes them available for investment in productive enterprises. Banks mobilise
deposits by offering attractive rates of interest and thus convert savings into active capital. Otherwise
that amount would have remained idle. Banks distribute these savings through loans among
productive enterprises which are helpful in nation building. It facilitates the optimum utilization of the
financial resources of the community.

2. Helps in generating employment opportunity Banks helps in providing financial resources to

industries and that helps in automatically generate employment opportunity. Especially employment
generated by banking sector every year runs in millions. Equally revenue generation through tax and
dividend collection by the government invested every year. While revenue and employment
generation are two very important contributions, successfully maintaining healthy credit line to
industrial sector as well as to overall economy is another important contribution of financial sector.

3. Financial assistance to Industries The commercial banks finance the industrial sector in a number of
ways. They provide short-term, medium-term and long-term loans to industry .The Industrial
Development Bank of India is the main institution in India providing financial assistance to the
industrial sector. It provides direct financial assistance to the industrial enterprises in the form of
granting loans and advances, and purchasing or underwriting the issues of stocks, bonds or
debentures. The creation of the Development Assistance Fund is the special of the IDBI.
4. Promote saving Habits of the people Bank attracts depositors by introducing attractive deposit schemes and
providing higher rates of interest. Banks providing different kinds of deposit schemes to its customers. It enables to
create saving habits among people. Bank open different accounts to attract customer. These accounts are opened
as per the requirements of customers such as current account, fixed deposit account, saving account and recurring
account etc.

5. Financial assistance to Consumer Activities People in underdeveloped countries being poor and having low
incomes do not have sufficient financial resources to buy durable consumer goods. The commercial banks advance
loans to consumers for the purchase of such items as houses, furniture, refrigerators, etc. In this way, they also help
in raising the standard of living of the people in developing countries by providing loans for consumption activities.

6. Helps in implementing Monetary Policy The commercial banks help the economic development of a country by
implementing the monetary policy of the RBI. RBI depends upon the commercial banks for the success of its policy
of monetary management in keeping with requirements of a developing economy. Thus the commercial banks
contribute much to the growth of a developing economy by granting loans to agriculture, trade and industry, by
helping in capital formation and by following the monetary policy of the cou
7. Financial facilities for Trade The commercial banks help in financing both internal and external trade. The
banks provide loans to retailers and wholesalers to purchase goods in which they deal. They also help in
the movement of goods from one place to another. Banks provide all types of facilities such as discounting
and accepting bills of exchange, providing overdraft facilities, issuing drafts, etc. for promoting the trade.
Moreover, they finance both exports and imports of developing countries by providing foreign exchange
facilities to importers and exporters of goods.

8. Foreign Currency Loans Foreign currency loans are meant for setting up of new industrial projects. Banks
also helps in providing loans for expansion, diversification, modernization or renovation of existing units.
Banks also helps in financing import of equipment from abroad.
9. Promotion of New Entrepreneurs Development banks in India have also achieved a success
in creating a new class of entrepreneurs and spreading the industrial culture. Special capital
and seed Capital schemes have been introduced to provide equity type of assistance to new
and technically skilled entrepreneurs who lack financial resources of their own. Development
banks have been actively involved in the entrepreneurship development programmes.
Innovations are an essential prerequisite for economic development. These innovations are
mostly financed by bank credit in the developed countries. But in underdeveloped countries,
entrepreneurs hesitate to invest in new ventures and undertake innovations largely due to
lack of funds and high chances of risk. Facilities of bank loans enable the entrepreneurs to
step up their investment on innovational activities, adopt new methods of production and
increase productive capacity of the economy.

10. Balanced Development Modern banks spreading its operations throughout the world.
We can see number of big banks like citi bank, SBI, PNB, Baroda bank etc. It helps a country to
spread banking activities in rural and semi urban areas. With the spreading of banking
operations all over the country, helps to attain balanced regional development by promoting
rural areas. The Reserve Bank of India (RBI) has granted in-principle licenses to 10 applicants
to open small finance banks,
Extra Dip:
 Transport
Transport System and Economic Development in India. A good transport system can
broaden the market for goods. It can also make the movement of raw materials, fuel,
equipment, etc. to the places of production easy. Further, it opens up remote regions as well as
resources for production.

Because of its intensive use of infrastructures, the transport sector is

an important component of the economy and a common tool used for development. ... At the
aggregate level, efficient transportation reduces costs in many economic sectors, while
inefficient transportation increases these costs.
 ROLE OF TRANSPORT

1.Transportation And Agriculture

The Indian economy is mainly agronomic in nature. Irrespective of the rapid development in other sectors,
agriculture, and related sectors still are the important sector contributing towards the Gross Domestic Production
of the nation. Transport is considered one of the crucial factors in boosting agricultural productivity. It not only
improves the quality of life of people but also builds a market for agrarian produce. Transportation facilitates the
connection between topographical and economic regions and creates new areas to commercial focus.

2.Transport And Industries

The warehousing and transportation industry include sectors like cargo transportation, warehousing and storage
for goods, providing transportation of passengers. These industries make the use transportation-related facilities
and transportation equipment as their fruitful asset. The industries which have no or poor access to rail tracks,
the road transport supports them by improving their supply chain.
3.Transport And Education
The road transport sector is the backbone of huge economies and dynamic communities. It
plays a significant role in enabling the students in rural areas to reach the schools for higher
education. There was the time when no reliable transport system was available for the
students in the rural areas. Due to the poor road network, it was the biggest challenge to
continue education. Sometimes they faced inconvenience by traveling to their schools in
overpacked public transports.
4. Employment Generation (DIY)

5. Broaden the markets:(DIY)

 Insurance

Insurance generates significant impact on the economy by mobilizing domestic

savings. Insurance sector provides capital into productive investments.
Insurance enables to mitigate loss, financial stability and promotes trade and
commerce activities those results into economic growth and development.
Insurance is an important part in the financial sector that contributes significantly to
the economy of a country. Insurance serves a number of valuable economic functions
that are largely distinct from other types of financial intermediaries.

In India, insurance is a flourishing Industry, with several national and international

players competing each other's and growing at rapid rates. The insurance industry of
India consists of 53 insurance companies of which 24 are in life insurance business
and 29 are non-life insurers.
Among the life insurers, Life Insurance Corporation is the sole public
sector company. Apart from that, among the non-life insurers there are six public
sector insurers. India is the fastest growing trillion-dollar economy in the world and
the sixth largest with a nominal GDP of $ 2.61 trillion. India is poised to become the
fifth largest economy overtaking the United Kingdom by 2019 as per the IMF
projection.
 ROLE OF INSURANCE

The following point shows the role and importance of insurance:

Insurance has evolved as a process of safeguarding the interest of people from loss and uncertainty. It may be
described as a social device to reduce or eliminate risk of loss to life and property.
Insurance contributes a lot to the general economic growth of the society by provides stability to the functioning
of process. The insurance industries develop financial institutions and reduce uncertainties by improving
financial resources.

1. Provide safety and security:

Insurance provide financial support and reduce uncertainties in business and human life. It provides safety and
security against particular event. There is always a fear of sudden loss. Insurance provides a cover against any
sudden loss. For example, in case of life insurance financial assistance is provided to the family of the insured on
his death. In case of other insurance security is provided against the loss due to fire, marine, accidents etc.
2. Generates financial resources:
Insurance generate funds by collecting premium. These funds are invested in government securities and
stock. These funds are gainfully employed in industrial development of a country for generating more
funds and utilised for the economic development of the country. Employment opportunities are
increased by big investments leading to capital formation.

3. Life insurance encourages savings:

Insurance does not only protect against risks and uncertainties, but also provides an investment channel
too. Life insurance enables systematic savings due to payment of regular premium. Life insurance
provides a mode of investment. It develops a habit of saving money by paying premium. The insured get
the lump sum amount at the maturity of the contract. Thus life insurance encourages savings.
4. Promotes economic growth:
Insurance generates significant impact on the economy by mobilizing domestic savings. Insurance turn accumulated capital
into productive investments. Insurance enables to mitigate loss, financial stability and promotes trade and commerce
activities those results into economic growth and development. Thus, insurance plays a crucial role in sustainable growth of
an economy.

5. Medical support:
A medical insurance considered essential in managing risk in health. Anyone can be a victim of critical illness unexpectedly.
And rising medical expense is of great concern. Medical Insurance is one of the insurance policies that cater for different
type of health risks. The insured gets a medical support in case of medical insurance policy.

6. Spreading of risk:
Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of insurance is to spread risk
among a large number of people. A large number of persons get insurance policies and pay premium to the insurer.
Whenever a loss occurs, it is compensated out of funds of the insurer.
Communication

– The Role of Communication Infrastructure Investment

in Economic Recovery. ... They serve as a communication and
transaction platform for the entire economy and can improve productivity
across all sectors. Advanced communication networks are a key
component of innovative ecosystems and support economic growth
 .
Contribution of Communication

1.Communication sector to become

largest contributor to India's GDP

2. Improved productivity in all Sectors.

3. Infrastructure development of
country.

4. E-Kranti

5. E-Governance.

6. Employment Generation.
.
 Role of communication

Social Sustainable Economic

interaction development planning

Circulation of Awareness to
knowledge development
The Role of Communication Infrastructure Investment in Economic Recovery

1.Broadband networks are increasingly recognised as fundamental for economic and social
development. They serve as a communication and transaction platform for the entire
economy and can improve productivity across all sectors. Advanced communication networks
are a key component of innovative ecosystems and support economic growth. Broadband
networks also increase the impact and efficiency of public and private investments which
depend on high-speed communications. Broadband is needed as a complementary
investment to other infrastructure such as buildings, roads, transportation systems, health
and electricity grids, allowing them to be “smart” and save energy, assist the aging, improve
safety and adapt to new ideas.
2.Broad band
BharatNet is connecting 2.5 lakh villages with optical fiber cables to provide high speed
internet. Kerela’s Idduki district first to connect all villages in it . States given option to bear
cost and then get reimbursed.
4.Urban areas to have IT infrastructure in all new buildings.
5.National information infrastructure to integrate SWAN
 Examples:
6.Universal mobile connectivity
1.Universal service obligation fund, National telecom plan.
E-Governance
1.Business process reengineering
2.Electronic forms, database
3.Automated workflow in office, grievance redressal systems
4.Digital locker for documents.
E-Kranti
1.e- healthcare, e-farming, security, e-healthcare, e-justice , financial
inclusion
Information to all
1.Government
Storage and warehousing

– A manufacturer needs to keep

adequate stock of raw materials to
ensure smooth production. A
trader has to maintain adequate
stock of the products he sells to
meet the demand. Maintenance of
stocks of raw materials and
finished products calls for
storage. Storage helps to preserve
goods at a particular place until
these are required elsewhere.
Functions of Storage
1. To preserve goods that are produced only during a particular season but are demanded
throughout the year (agricultural goods).

2. To preserve goods that are produced throughout the year but demanded during a particular
season (crackers, umbrellas, etc.).

3. To preserve the quality of certain goods, which in the absence of proper storage will
deteriorate.

4. To enable businessmen to make speculative gain, i.e., to wait and sell at a higher price.

5. To protect goods from pests and insects.

6. To ensure smooth production and distribution.

Ware House

– The meaning of the word ‘ware‘ is

‘article‘. A warehouse is a place
where goods are stored. It is
otherwise known as a ‘godown‘. It
is usually found away from the
place of business of a merchant.
The advantages of warehouse are
listed below.
 Role of storage and warehousing

Customer Boost Security

service efficiency of goods

Economic Value
benefits adding