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Q77 (IAS/2017) Economy › Growth, Development, Poverty & Employment › Economic reforms 1991 Official Key

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 :

Result
Your answer: —  Âˇ  Correct: B
Explanation

The correct answer is option B (statements 2, 3, and 4 only).

**Statement 1 is incorrect**: The share of agriculture in national GDP has been declining from over 50% in 1950-51 to 16% in 2019-20.[1] In the last 73 years after independence, Indian economy has moved from a dominant agricultural sector to the services sector constituting 54% share in India's GDP.[2] This clearly shows agriculture's share decreased, not increased.

**Statement 2 is correct**: While the documents mention India's declining share in global exports in certain contexts, the post-1991 liberalization period saw increased integration with world trade and expansion of India's export capabilities, particularly in services and manufacturing sectors.

**Statement 3 is correct**: Before the 1991 economic reforms, India's FDI inflows as a percentage of GDP were low and volatile, fluctuating around low single-digit percentages due to restrictive policies and regulatory barriers.[3] After 1991, the new policy was much more actively supportive of foreign investment in a wide range of activities. Permission is automatically granted for foreign equity investment up to 51% in a large list of 34 industries.[4]

**Statement 4 is correct**: India's Forex Reserves increased from $5.8 billion in 1991-92 to $407 billion by end of March 2018 and $505.7 billion by end of June 2020. India's forex reserves have increased to a great extent over the years from 1991-92 onwards.[5]

Sources
  1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.2 Agriculture in India: A brief history > p. 302
  2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > 6.5 Economy Jumped from Agriculture to Services > p. 220
  3. [3] https://www.jetir.org/papers/JETIR2501646.pdf
  4. [4] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > Following lists down the details of the major reforms carried out in June-July 1991: > p. 216
  5. [5] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 17: India’s Foreign Exchange and Foreign Trade > RESERVE ADEQUACY FEW MONTHS OF IMPORTS RULE VERSUS GUIDOTTI-GREENSPAN RULE > p. 497
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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 has/have occurred in India after its liberalization of economic policies in 1991 ? 1. Share of agriculture in GDP…
At a glance
Origin: Books + Current Affairs Fairness: Low / Borderline fairness Books / CA: 2.5/10 ¡ 2.5/10
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This is a foundational 'Macroeconomic Trends' question. It tests your grasp of the '1991 vs Now' story. It is considered a 'Sitter' because it relies on the most basic outcome of development economics: as an economy grows, the agricultural share in GDP falls, not rises. If you know the 1991 crisis was about Forex, you know it increased enormously later.

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
How did the share of agriculture in India's GDP change after the 1991 economic liberalization? Provide the trend and percentage-point change.
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 4/5
"Agriculture (28%) 1960/61 1980/81 1993/94 (14%)"
Why this source?
  • Gives a post‑liberalization observation (1993/94) for agriculture's share of GDP: 14%.
  • Provides earlier benchmark shares (e.g., 28% for 1980/81) showing a decline by the early 1990s period captured in the chart.
Web source
Presence: 4/5
"the share has declined from 55% in the early 1950s to about 30% in the early 1990s. India embraced a new Economic Policy in 1991"
Why this source?
  • States that agriculture's share was about 30% in the early 1990s and explicitly notes India embraced a new Economic Policy in 1991.
  • Combining this early‑1990s level (~30%) with the 1993/94 value (14%) yields the percentage‑point change after liberalization.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 10: Agriculture - Part I > 10.2 Agriculture in India: A brief history > p. 302
Strength: 5/5
“Agriculture is the most important sector of Indian economy from the perspective of poverty alleviation and employment generation and contribution to nation's GDP. The share of agriculture in national GDP has been declining from over 50% in 1950-51 to 16% in 2019- 20. In 1950-51, agriculture provided 70% employment which has now decreased to around42%. Hence the growth of Indian agriculture can be considered necessary condition for 'inclusive growth'. A report published by the World Bank says that "Growth in agriculture is critical for any economy as research has revealed that GDP growth originating in agriculture is at least twice as effective in reducing poverty as GDP growth originating outside agriculture".”
Why relevant

Gives a long-term pattern: the share of agriculture in GDP fell from over 50% in 1950–51 to 16% in 2019–20.

How to extend

A student can use this end-point (2019–20 = 16%) and look up or recall the agriculture share around 1991 to compute the post-1991 percentage-point change and infer the declining trend.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > 6.5 Economy Jumped from Agriculture to Services > p. 220
Strength: 4/5
“Introduction: As we can see from the above table, the share of Agriculture in India's GDP was 55% at the time of independence while services sector constituted 30% and industrial sector a meagre 15%. In the last 73 years after independence, Indian economy has moved from a dominant agricultural sector to the services sector constituting 54% share in India's GDP. Generally, the economies move from agriculture to industry (manufacturing) and then to services in their process of development but India is an exception and shifted directly from agriculture to services while ignoring the industrial sector. We will be able to understand why India ignored manufacturing only when we know what were the basic requirements of manufacturing sector and whether, we fulfilled those requirements in India or not.”
Why relevant

Describes structural shift: economy moved from agriculture-dominated (55% at independence) to services-dominated (54% more recently), signalling a persistent decline in agriculture's GDP share.

How to extend

Use this pattern (shift to services) to infer that after 1991 liberalisation the agricultural share likely continued to fall as services grew; combine with specific pre/post-1991 data to quantify change.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 7: Indian Economy after 2014 > 7.2 Manufacturing > p. 228
Strength: 4/5
“After India liberalized its economy in 1991, the services sector was among the fastest growing part of the economy, contributing significantly to GDP, economic growth, international trade and investment. Manufacturing contributes just 16 percent to India's GDP, compared to a 54 percent contribution by services. But the services sector employs fairly skilled people and India's most abundant resource is unskilled labour, that is why”
Why relevant

States that after 1991 the services sector was among the fastest growing parts of the economy, implying agriculture's share would fall as services expanded.

How to extend

Treat the post-1991 services surge as a causal clue; a student can compare agriculture's share before and after 1991 to estimate the percentage-point decline attributable to this shift.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > 6.7 Previous Years Questions > p. 226
Strength: 3/5
“• 1. Which of the following has/have occurred in India after its liberalization of economic policies in 1991? [2017] • (i) Share of agriculture in GDP increase enormously.• (ii) Share of India's exports in world trade increased.• (iii) FDI inflows increased.• (iv) India's foreign exchange reserves increased enormously Select the correct answer using the codes given below. • (a) (i) & (iv) only• (b) (ii), (iii) & (iv) only• (c) (ii) & (iii) only• (d) (i), (ii), (iii) & (iv)”
Why relevant

An exam-style item explicitly lists 'Share of agriculture in GDP increase enormously' as a proposed post-1991 outcome, implying this is a contested/common misconception to be evaluated.

How to extend

A student should reject that option by checking actual series for agriculture's share (pre- and post-1991) — the exam framing directs attention to verify rather than assume an increase.

Statement analysis

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Statement analysis

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Statement analysis

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SIMILAR QUESTIONS

IAS ¡ 2020 ¡ Q48 Relevance score: 4.28

With reference to the Indian economy after the 1991 economic liberalization, consider the following statements : 1. Worker productivity (₹ 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 ?

IAS ¡ 2000 ¡ Q88 Relevance score: 0.90

Assertion (A) : The rate of growth of India’s exports has shown an appreciable increase after 1991. Reason (R) : The Govt. of India has resorted to devaluation.

IAS ¡ 2010 ¡ Q87 Relevance score: 0.13

With reference to India economy, consider the following statements: 1. The Gross Domestic Product (GDP) has increased by four times in the last 10 years 2. The percentage share of Public Sector in GDP has declined in the last 10 years Which of the statements given above is/are correct?

CDS-II ¡ 2016 ¡ Q106 Relevance score: -0.77

Which one of the following statements is correct with respect to the composition of national income in India?

CDS-II ¡ 2018 ¡ Q75 Relevance score: -1.00

Statement I : Agriculture in India still accounts for a substantial share in total employment. Statement I : There has been no decline in volatility of agricultural growth in India.