Question 83 from UPSC CSE 2020 - ECONOMICS

Question

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 the non-farm economy increased.
4. The growth rate in rural employment decreased.
Which of the statements given above is/are correct?

IASCODEX · Accepted Answer

Correct Option: B. 3 and 4 only

Strategy: -   Assess statements against key statistical trends post-1991:
    -   Productivity rose in both rural and urban areas, negating Statement 1.
    -   Urbanization reduced rural workforce share, eliminating Statement 2.
-   Recognize established trends:
    -   Rise of the rural non-farm sector (Statement 3).
    -   Slowdown/decline in rural employment growth (Statement 4).
-   Identify correct options: Only those including both Statement 3 and Statement 4 are valid. Option B fits this criterion.

Key Info: Economic liberalization in 1991 transformed India's growth path, affecting labor dynamics and sectoral composition.

-   **Worker Productivity:** Both rural and urban productivity increased post-1991, driven by modernization, technology adoption, greater market linkages, and growth in higher-value activities, as seen in National Sample Survey and NITI Aayog data.
-   **Rural Workforce Share:** With accelerating urbanization, the share of rural areas in the total workforce steadily declined, from nearly 78% in 1993-94 to around 71% by 2011-12, according to Census and labor surveys.
-   **Non-Farm Rural Economy:** There has been considerable diversification of rural livelihoods. Non-farm activities (manufacturing, construction, services, trade) significantly expanded, raising their income share from 43% in 1993-94 to 61% in 2011-12. Driving factors included rural infrastructure growth, migration, and policy shifts post-liberalization.
-   **Growth Rate of Rural Employment:** Despite high GDP growth, post-2004-05 rural employment growth slowed or turned negative, indicating 'jobless growth' and structural shifts (rise of capital-intensive sectors, declining labor absorption in agriculture). The rural employment annual growth rate dropped to -0.28% (2005-12), per NSSO.

Key institutions such as NITI Aayog, National Statistical Office (NSO), and earlier reports by the Planning Commission provide quantitative data on these trends.
Policy examples include the National Rural Employment Guarantee Act (NREGA, 2005), which sought to address rural employment shortfall.
These trends are significant for understanding the post-liberalization rural socio-economic landscape.

IASCODEX · Answer

Option A: 1 and 2 only

IASCODEX · Answer

Option C: 3 only

IASCODEX · Answer

Option D: 1, 2, and 4 only