Prelims 2020

Q. With reference to the Indian economy after the 1991 economic liberalization, consider the following statements:

1.Worker productivity (Rs. per worker at 2004 — 05 prices) increased in urban areas while it decreased in rural areas.
2.The percentage share of rural areas in the workforce steadily increased.
3.In rural areas, the growth in non-farm economy increased.
4.The growth rate in rural employment decreased.

Which of the statements given above is/are Correct?
a) 1 and 2 only
b) 3 and 4 only
c) 3 only
d) 1, 2 and 4 only
Correct Answer : b) 3 and 4 only

Question from UPSC Prelims 2020 GS Paper


Economic Liberalization of 1991

The economic liberalization of 1991 in India marked a significant shift in the country’s economic policies, moving towards a more open and market-oriented economy. This period saw various changes in the structure of the Indian economy, including shifts in employment patterns, productivity, and the composition of the workforce.

Analysis of the Statements

2. The percentage share of rural areas in the workforce steadily increased. – This statement is incorrect. The trend has been the opposite; the percentage share of the rural workforce has been decreasing as more people migrate to urban areas for better employment opportunities, and as the economy shifts more towards the services and industrial sectors, which are predominantly urban-based.

3. In rural areas, the growth in the non-farm economy increased. – This statement is correct. Post-liberalization, there was a significant increase in the non-farm economy in rural areas. This includes manufacturing, construction, and services. The diversification of the rural economy helped in absorbing the workforce that could not be accommodated in the agricultural sector, contributing to rural development and poverty reduction.

4. The growth rate in rural employment decreased. – This statement is correct. The growth rate in rural employment has decreased, particularly in the agricultural sector, which has seen a decline in its ability to absorb labor due to various factors including mechanization, improved productivity requiring less labor, and land fragmentation. However, the non-farm sector has seen growth, but not enough to completely offset the decline in agricultural employment growth rates.

Given the analysis, the correct statements are 3 and 4, making the correct answer:

b) 3 and 4 only

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