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:

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.