UPSC Prelims 2017 Q77: Indian Economy – Economic Planning & Five - Year Plans
Which of the following has/have occurred in India after its liberalization of economic policies
in 1991?
1. Share of agriculture in GDP increased enormously.
2. Share of India’s exports in world trade increased.
3. FDI inflows increased.
4. India’s foreign exchange reserves increased enormously.
Select the correct answer using the codes given below:
- (a) 1 and 4 only
- (b) 2, 3 and 4 only
- (c) 2 and 3 only
- (d) 1, 2, 3 and 4
Answer: (b) 2, 3 and 4 only
Explanation
India after the liberalization of 1991
| Statement | Verdict | Fact |
|---|---|---|
| 1. Share of agriculture in GDP increased enormously | Incorrect | It fell, from about 30 percent in 1991 to about 15 to 17 percent |
| 2. Share of India's exports in world trade increased | Correct | Rose from about 0.5 percent to over 1.5 percent |
| 3. FDI inflows increased | Correct | Foreign investment rules were opened up sector by sector |
| 4. India's foreign exchange reserves increased enormously | Correct | From under 6 billion dollars in 1991 to over 350 billion dollars by 2017 |
Structure of GDP after 1991:
| Sector | Trend |
|---|---|
| Agriculture | Share declined |
| Industry | Share broadly stable |
| Services | Share rose sharply; now over half of GDP |
Answer: (b) 2, 3 and 4 only.
Why each option is right or wrong
- (a) Incorrect. The share of agriculture in GDP fell after 1991; it did not increase.
- (b) CORRECT. Exports share, FDI inflows and foreign exchange reserves all increased after 1991.
- (c) Incorrect. Statement 4 is also true: foreign exchange reserves increased enormously.
- (d) Incorrect. Statement 1 is false; agriculture's share has declined steadily.
Key point
After 1991: agriculture's GDP share fell, services rose; exports share, FDI inflows and foreign exchange reserves all increased.
Remember
After 1991: agriculture share down; exports, FDI, reserves up.
Common mistakes
- Confusing a rise in farm output with a rise in agriculture's share of GDP.
- Doubting statement 4; the 1991 crisis began with reserves for only a few weeks of imports.
- Thinking India's share of world trade is large; it rose but remains small.
Exam tip
As an economy grows, agriculture's share of GDP falls. This holds for every country.
Sources
- NCERT Class XI — Indian Economic Development, Ch 3 (Liberalisation, Privatisation and Globalisation: An Appraisal)
- Reserve Bank of India — Handbook of Statistics on the Indian Economy