Economic activities

Topic: Employment, Unemployment and Informalisation · NCERT: Class 6, Ch 13 "The Value of Work"; Class 6, Ch 14 "Economic Activities Around Us"; Class 10, Ch 2 "Sectors of the Indian Economy"; Class 11, Ch 6 "Employment: Growth, Informalisation and Other Issues"; Class 11, Ch 1 "Introduction (Statistics for Economics)"

Meaning

An economic activity is any activity that adds to a country's gross national product (GNP), meaning the value of all final goods and services made by the country's normal residents in a year, at home or abroad. Anyone who does such an activity, in any role, high or low, paid in cash or in kind, is a worker.

This matters because the boundary of economic activity decides three things: who counts as a worker, what goes into the national income, and whose work stays invisible. Unpaid housework is the main example of work that stays invisible.

GNP = GDP + net factor income from abroad (NFIA)

Explanation

What counts as economic activity

• The test is simple. Does the activity add to GNP? If yes, it is an economic activity.
• Why people do it:
• To earn a living. NCERT says money that is only inherited "does not completely satisfy anybody".
• For self-worth and dignity. Work gives a person a place in society.
• To support dependants. Dependants are family members who rely on the earner, such as children or elderly parents.

• To build the nation:

  • a worker produces goods or services → the output is added to GDP/GNP → national income rises → the country develops.

• The type of payment does not matter:

• Wage is paid for a set period of work, for example a mason's daily wage.
• Salary is fixed regular pay, usually monthly, for example a bank cashier's pay.
• Fee is paid for professional services, for example a doctor's fee.

• Payment in kind is non-cash pay, for example a farm labourer paid in mangoes. This is still income, the output still counts in GNP, and so the labourer is still a worker.

• The place of work does not matter:

• Work at home can be traditional (weaving, lace-making) or modern (IT programming).
• Footballs stitched in homes in Jalandhar, Punjab are sold by MNCs (multinational companies). This shows that home-based work is part of the economic boundary.
• Millions of people worked from home during COVID-19 (2020-21).

Who is inside the boundary and who is outside

Person	Economic activity?	Why
Self-employed person, for example a farmer on their own land or a shopkeeper	Yes	They produce output even without an employer.
Raj, a schoolboy who works on the family farm after school	Yes	Farm output counts in GNP, and helpers are workers.
Meena, a housewife who helps in her husband's cloth shop	Yes, for the shop work	She is an unpaid helper in a family enterprise.
Meena's housework alone	No	Housework for her own household is outside the GNP boundary.
A worker temporarily absent because of illness, injury, bad weather, festivals or social and religious functions	Still a worker	The absence is short, and the person's link to economic activity continues.
Beggar, thief, smuggler, gambler	No	Nothing new is produced. The activity is a transfer (money only moves from one person to another) or is illegal.

GNP, not GDP plus net exports (a known NCERT error)

• GDP (gross domestic product) is the value of final goods and services produced within the country's borders.
• NFIA is what Indian residents earn from abroad (wages, rent, interest, profit) minus what foreigners earn in India.
• NCERT error: Class 11 builds GNP as GDP plus the "net earning" from exports and imports. This is wrong. Net exports (X − M) are already part of GDP (GDP = C + I + G + X − M).
• Worked example:
• GDP = ₹300 lakh crore.
• Indians earn ₹4 lakh crore abroad. Foreigners earn ₹6 lakh crore in India.
• NFIA = 4 − 6 = −₹2 lakh crore.
• GNP = 300 + (−2) = ₹298 lakh crore. When NFIA is negative, as it is for India, GNP is less than GDP.

The wider ILO idea of "work"

• The 19th ICLS (2013) (International Conference of Labour Statisticians, run by the ILO) defines work as any activity done by persons of any sex and age to produce goods or provide services for use by others or for own use [3][4].
• It lists five forms of work: own-use production work, employment, unpaid trainee work, volunteer work and other forms of work [3][4].
• Employment now has a narrower meaning: work done for pay or profit [3][4].
• Own-use production work means producing goods or services for final use by the producer's own household [3].
• So under the ILO framework, housework counts as "work" but not as "employment". This is the same line NCERT draws in the Meena example.

In India

• The official measure: The Periodic Labour Force Survey (PLFS) is run by the National Sample Survey Office (NSSO) under MoSPI. It was launched in April 2017 [2].
• How PLFS captures economic activity [2]:
• Usual Status uses the last 365 days before the survey.
• Principal status (ps) is the activity a person spent a relatively long time on in those 365 days.
• Subsidiary status (ss) is an extra economic activity done for 30 days or more in that year. Counting ps+ss catches part-time helpers like Raj.

• Current Weekly Status (CWS) uses the last 7 days before the survey.

• Key ratios [2]:

• LFPR (Labour Force Participation Rate) = (people working or seeking or available for work ÷ population) × 100.
• WPR (Worker Population Ratio) = (employed persons ÷ population) × 100.

• UR (Unemployment Rate) = (unemployed persons ÷ labour force) × 100.

• Worked example:

• A village has 1,000 people aged 15 and above. 600 are in the labour force, and 580 of them are working.

• LFPR = 600/1,000 = 60%. WPR = 580/1,000 = 58%. UR = 20/600 = 3.3%.

• Latest data, PLFS 2023-24, persons aged 15+, usual status (ps+ss) [2]:

• LFPR 60.1%, WPR 58.2%, UR 3.2%.
• Female WPR rose from 22.0% (2017-18) to 40.3% (2023-24). In rural areas it rose from 23.7% to 46.5%, while urban female WPR was 26.0% in 2023-24.
• On CWS (2023-24), WPR was 53.7% and UR was 4.9%.

• The survey covered 1,01,920 households and 4,18,159 persons [2].

• Size of the workforce (NCERT):

• About 545 million in 2022-23. About two-thirds are rural and about 77% are men.

• The same chapter gives 535 million for 2019-20. Use each figure only with its own year.

• Work outside the boundary, from the Time Use Survey (TUS) 2024 [5]:

• 83.1% of women and 26.4% of men did unpaid domestic services for their household on a normal day.
• Women aged 15-59 who did such work spent about 305 minutes a day on it in 2024, down from about 315 minutes in 2019.

Don't confuse with

• Economic activity vs non-economic activity: Housework for one's own family, begging and gambling add nothing to GNP, so they are non-economic. The same person can do both. Meena's shop work counts, but her housework does not.
• Work (ILO) vs employment: Under the 19th ICLS, "work" includes own-use production and volunteering, while "employment" means only work for pay or profit [3][4]. An unpaid homemaker does "work" but is not "employed".
• GNP vs GDP: GDP counts output within the borders. GNP counts output by residents: GNP = GDP + NFIA, not GDP + net exports.
• Worker vs employee: An employee works for someone else for a wage or salary. A worker is broader and also includes the self-employed and unpaid family helpers.

Prelims Hooks

• An economic activity is anything that adds to GNP. A beggar, thief, smuggler or gambler is not a worker.
• An unpaid helper in a family enterprise (Meena in the shop, Raj on the farm) is a worker. A labourer paid in kind (for example, in mangoes) is also a worker.
• A person temporarily absent because of illness, bad weather or festivals is still counted as a worker.
• GNP = GDP + NFIA. Net exports (X − M) are already part of GDP. The NCERT Class 11 version is wrong.
• PLFS was launched by NSSO (MoSPI) in April 2017. Subsidiary status means economic activity for 30 days or more in 365 days [2].
• 19th ICLS (2013) recognises five forms of work, and "employment" means only work for pay or profit [3][4].

Mains Points

• Invisible women's work:
• 83.1% of women and 26.4% of men do unpaid domestic work (TUS 2024) [5]. This work is outside the GNP boundary, so women doing only housework are not counted as workers.

• As a result, national accounts under-value women's contribution. The ILO's wider "work" concept [3] and time-use surveys help make this care economy visible. This is useful for GS-I and GS-III answers.

• Rising female WPR: good news or distress?

• Female WPR rose from 22.0% to 40.3% between 2017-18 and 2023-24, mostly in rural areas [2].

• Part of this rise may be women joining as unpaid helpers in family farms and shops. They count as workers but may earn little and have no security. A good answer discusses the quality of work, not only the number of workers.

• The home as workplace, and Gandhi's warning on machines:

• Outsourcing, work from home and home-based production (such as the Jalandhar footballs) widen economic activity. They also push it into the informal sector, with no fixed hours and no social security. The 2022 IT-sector moonlighting dispute shows the same tension inside formal jobs.
• Gandhi warned that the "craze" for labour-saving machines throws people out of work. This is technological unemployment (jobs lost when machines replace workers). Policy has to balance automation with skilling and labour-intensive growth.

Related concepts

• Worker
• Workforce
• Wage
• Salary
• Payment in kind
• Fee
• Employee
• Employer
• Work from home
• Moonlighting

Read more

• Work, workers and the boundary of economic activity