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Q97 (IAS/2022) Economy › Basic Concepts & National Income › Real vs financial sector Official Key

Which of the following activities constitute real sector in the economy? 1. Farmers harvesting their crops 2. Textile mills converting raw cotton into fabrics 3. A commercial bank lending money to a trading company 4. A corporate body issuing Rupee Denominated Bonds overseas Select the correct answer using the code given below:

Result
Your answer: —  ·  Correct: A
Explanation

The correct answer is Option 1 (1 and 2 only). In economics, the real sector refers to the portion of the economy that produces tangible goods and non-financial services, directly impacting the GDP through production and consumption.

  • Statement 1: Farmers harvesting crops involve primary production, creating physical output.
  • Statement 2: Textile mills converting cotton into fabric represent secondary production or manufacturing. Both are core components of the real sector.
  • Statements 3 and 4: These belong to the financial sector. Commercial bank lending and the issuance of Rupee Denominated Bonds (Masala Bonds) involve the movement of money, credit, and paper claims rather than the direct production of goods.

While the financial sector supports the real sector by providing liquidity, they are distinct. Since only statements 1 and 2 involve the actual production of physical goods, Option 1 is the only correct choice.

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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. Which of the following activities constitute real sector in the economy? 1. Farmers harvesting their crops 2. Textile mills converting r…
At a glance
Origin: Books + Current Affairs Fairness: Moderate fairness Books / CA: 5/10 · 5/10
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This is a classic 'Concept Application' question. It doesn't require memorizing current affairs about Masala Bonds; it requires a rock-solid grasp of the definition of 'Real Sector' (production of goods/services) versus 'Financial Sector' (money/assets). If you understand the Circular Flow of Income, this is a sitter.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Are farmers harvesting their crops considered part of the real sector in the economy?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Exploring Society:India and Beyond. Social Science-Class VI . NCERT(Revised ed 2025) > Chapter 14: Economic Activities Around Us > Classification of economic activities into economic sectors > p. 198
Presence: 5/5
“For example, work involving cultivation of grains and vegetables from agricultural farms, collecting wood from the forests, extracting coal from mines, fish from fisheries, eggs from poultry farms, etc., are all primary sector economic activities. The most common primary activities are agriculture, mining, fishing, raising livestock, forestry, etc. Below are some of the types of activities within the primary sectors.”
Why this source?
  • Explicitly classifies cultivation (and related activities) such as harvesting as primary sector economic activities.
  • Lists agriculture as a core primary activity, linking crop-related work to the production side of the economy.
Economics, Class IX . NCERT(Revised ed 2025) > Chapter 1: The Story of Village Palampur > Let's Discuss > p. 8
Presence: 4/5
“crops grown on the land. Instead they are paid wages by the farmer for whom they work. Wages can be in cash or in kind e.g. crop. Sometimes labourers get meals also. Wages vary widely from region to region, from crop to crop, from one farm activity to another (like sowing and harvesting). There is also a wide variation in the duration of employment. A farm labourer might be employed on a daily basis, or for one particular farm activity like harvesting, or for the whole year. Dala is a landless farm labourer who works on daily wages in Palampur.”
Why this source?
  • Mentions harvesting as a discrete farm activity for which labour is employed.
  • Connects harvesting to paid agricultural work (wages in cash or kind), showing it is an economic production activity.
Understanding Economic Development. Class X . NCERT(Revised ed 2025) > Chapter 2: SECTORS OF THE INDIAN ECONOMY > p. 25
Presence: 4/5
“Does this mean that the workers in agriculture are not producing as much as they could? What it means is that there are more people in agriculture than is necessary. So, even if you move a few people out, production will not be affected. In other words, workers in the agricultural sector are underemployed. For instance, take the case of a small farmer, Laxmi, owning about two hectares of unirrigated land dependent only on rain and growing crops, like jowar and arhar. All five members of her family work in the plot throughout the year. Why? They have nowhere else to go for work.”
Why this source?
  • Discusses workers in agriculture and agricultural production, linking farm work to sectoral output and employment.
  • Describes agriculture as a sector where production and labour inputs determine output, consistent with real-sector activities.
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Statement analysis

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Statement analysis

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