Question map
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 ?
Explanation
The correct answer is Option 2 (3 and 4 only). Post-1991 reforms significantly altered the rural economic landscape.
- Statement 3 is correct: Liberalization facilitated a structural shift. The rural non-farm sector (construction, manufacturing, and services) grew as dependence on traditional agriculture declined, leading to increased non-farm output and income.
- Statement 4 is correct: Despite the shift to non-farm sectors, the overall growth rate of rural employment slowed down. This period was characterized by "jobless growth," where productivity gains did not translate into proportional employment generation in rural regions.
- Statement 1 is incorrect: Worker productivity actually increased in both urban and rural areas due to technological interventions and better capital access, not just urban areas.
- Statement 2 is incorrect: The percentage share of the rural workforce in the total workforce has generally decreased over time due to rapid urbanization and migration to cities for better opportunities.
Thus, statements 3 and 4 accurately reflect the post-reform trends of non-farm expansion and sluggish employment growth.
PROVENANCE & STUDY PATTERN
Full viewThis is a classic 'Macro-Trend' question disguised as a data question. You don't need the NITI Aayog report; you need the 'Story of Indian Economy' since 1991: Urbanization, shift to Non-Farm jobs, and the infamous 'Jobless Growth'. If you understand the direction of these vectors, the data points become irrelevant.
This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.
- Statement 1: After India's 1991 economic liberalization, did worker productivity (rupees per worker at 2004-05 prices) increase in urban areas?
- Statement 2: After India's 1991 economic liberalization, did worker productivity (rupees per worker at 2004-05 prices) decrease in rural areas?
- Statement 3: After India's 1991 economic liberalization, did the percentage share of rural areas in India's total workforce steadily increase?
- Statement 4: After India's 1991 economic liberalization, did growth in the rural non-farm economy increase?
- Statement 5: After India's 1991 economic liberalization, did the growth rate of rural employment decrease?
- This passage presents Table 6.1 which lists worker-productivity figures including an 'Urban' series across years.
- Presence of urban time-series data in the table implies changes (increases/decreases) in urban worker productivity over the decades.
- States that the absolute level of income per worker has increased over time.
- An overall rise in income per worker supports the inference that worker productivity increased (including in urban areas).
- Reports that by 2011-12 urban workers earned substantially more than rural non-farm workers (64% higher), indicating higher urban per-worker incomes.
- Higher urban per-worker income in 2011-12 is consistent with an increase in urban worker productivity over the period.
States that after 1991 liberalisation the services sector became the fastest growing part of the economy and now contributes a large share of GDP while manufacturing's share is much smaller.
A student could combine this with the fact that services typically generate higher output per worker than low-productivity manufacturing/agriculture to suspect urban (service-dominated) productivity rose; then check urban GDP and urban worker counts to compute rupees per worker.
Notes that globalisation benefited well-off urban consumers with better choices and higher standards of living, implying rising urban incomes and consumption.
Use this as a clue that urban per-worker output or wages may have increased post-liberalisation and then compare urban nominal/real income series or urban GDP per worker (converted to 2004–05 prices).
Reports that liberalisation accelerated GDP growth (to ~6–8%) and transformed India toward a services-dominated economy (services ~55% of GDP), while also noting many people were left out.
A student could infer rising aggregate output (numerator) and, if urban employment growth was slower than output growth, expect higher urban output per worker; they would then compare urban employment and value-added time series to test the statement.
Gives evidence of falling national poverty rates and higher overall growth after 1991, indicating rising real incomes for many (aggregate welfare/productivity signals).
Combine national per-capita/poverty improvements with urban bias of globalization to hypothesize stronger urban productivity gains, then verify by calculating urban rupees-per-worker from urban GDP and urban workforce data at 2004–05 prices.
States that liberalisation produced regional disparities with concentration of investment in particular states (many of which contain large urban centres).
A student could use this to argue productivity gains were likely concentrated in specific urban areas (states listed), so they should check urban productivity trends at state/city level rather than only national urban aggregates.
- Directly states the trend in income per worker: it increased modestly over time, which contradicts a decrease in rural worker productivity.
- Notes a recent decline in disparity but affirms absolute levels rose, so overall rural productivity did not fall.
- Describes how non-farm productivity was already higher and that by 2004-05 disparity between farm and non-farm increased (implying non-farm gains rather than a general rural decline).
- Shows agricultural share in output fell while workforce share fell little, indicating shifts that raised per-worker gaps rather than an overall rural decline.
- States that agricultural labourers are at the bottom in worker productivity and rural non-farm sector is substantially more productive, indicating increases in some rural categories rather than an overall fall.
- Refers to trend tables of worker productivity, implying examination of levels over time (noting disparity remained high).
States that agriculture was not touched by 1991 reforms and the rural economy ‘remained weak’, implying limited productivity gains in rural sectors compared with industry/services.
A student could compare sectoral GDP per worker time series (rural/agriculture vs national/services) before and after 1991 to see if rural rupees-per-worker stagnated or fell.
Notes that liberalisation shifted India from an agricultural to a services economy and that high growth bypassed a large section of people — suggesting gains concentrated outside rural/agricultural workers.
One could use national accounts to partition growth by sector and infer rural worker productivity trends by comparing agricultural value-added per worker pre/post-1991.
Explains that since the 1990s many organised-sector workers lost jobs and took low-earning unorganised jobs, and rural unorganised sector comprises low-income categories (landless labourers, small/marginal farmers).
A student might check wage and employment composition data (organised vs unorganised; rural wages) to judge whether average rupees-per-worker in rural areas fell.
Points out liberalisation increased regional disparities with investments concentrated in certain states, implying many rural regions may not have benefited and thus could see stagnant/declining productivity.
A student could map investment and state GDP-per-worker changes to test if lagging, largely rural states experienced declines in rupees-per-worker after 1991.
Provides labour-force distribution facts: about 70% of workforce in rural areas and higher rural unemployment — important context for interpreting aggregate rural productivity measures.
Using labour-force shares and unemployment trends, a student could compute rupees-per-worker (total rural value-added divided by rural employed) to see direction of change post-1991.
- Gives baseline and trend: rural areas engaged 84.1% of workforce in 1970-71 but rural share in total employment 'witnessed a decline'.
- States rural share in national income declined sharply till 1999-00, implying employment share did not steadily rise after liberalization (1991).
- Documents sectoral shifts after 2004-05, noting that 'rural areas lost to urban areas in a big way after 2004-05', which indicates rural employment share did not steadily increase.
- Notes that increases in rural manufacturing output were not matched by commensurate increases in rural employment, further undermining a steady rise in rural workforce share.
States that rural→urban migration has caused a steady increase in urban population (1951:17.29% → 2011:31.80%), implying a declining rural share of population (and plausibly workforce).
A student could combine this with census/workforce time-series to check if rising urban population coincides with falling rural workforce share after 1991.
Gives occupational-structure trend: primary-sector employment fell from 72.7% (1950–51) to 42.4% (2017–18), and rural workforce is mainly in primary sector — indicating long-run decline in rural/primary employment share.
One can map primary-sector decline to rural workforce share using labour surveys (PLFS/ census) to test post‑1991 trends.
Notes that rural economy remained weak after 1991, demand for manufactured goods from rural areas stayed low, and agricultural sector was largely untouched by reforms — suggesting limited rural job growth from liberalization.
Use this pattern to hypothesize that post‑1991 growth favored services/urban jobs; then compare workforce shares before and after 1991 to confirm.
Describes transformation from an agricultural economy to a services economy after liberalization, with services forming ~55% of GDP — implying employment growth concentrated outside agriculture/rural areas.
A student could check sectoral employment data (agriculture vs services) over 1991–present to infer corresponding rural workforce share changes.
Reports increase in area under non-agricultural uses and expansion of urban/rural settlements due to growth in industry/services — consistent with structural change and urban-centric development.
Combine land-use/urban expansion evidence with migration and employment statistics to test whether rural workforce share fell rather than rose post‑1991.
- Provides explicit post-reform period growth rates showing a strong acceleration in non-farm sector growth.
- Quantifies non-farm growth (9.21%) for 2004-05 to 2011-12, indicating increased non-farm activity in the rural economy after reforms.
- Describes changes across pre- and post-reform periods, noting a decline in agricultural share and highlighting non-farm sector growth rates.
- Specifically contrasts decelerating agricultural growth with continued activity in non-farm sectors during the post-reform period.
- Notes that after 2004-05 rural areas saw high output growth despite negative employment growth, consistent with rising output in non-farm (and other) rural sectors.
- Supports the view that rural output (including non-farm activity) increased in the post-reform period even if employment did not keep pace.
States that India's rural economy remained weak after 1991 while services and industry liberalized, implying limited demand from rural areas for manufactured goods.
A student could combine this with labour-market or district-level data (e.g., rural employment by sector) to check whether non-farm rural activity expanded despite weak rural demand.
Shows post‑1991 growth concentrated in services and that this high growth 'bypassed a large section of people', suggesting uneven spread of gains to rural areas.
Use regional/state-level GDP or sectoral growth breakdowns to see if rural regions saw rising non-farm output or remained excluded from the services boom.
Notes services were the fastest-growing sector after 1991 while manufacturing remained small (16% of GDP) and India's abundant resource was unskilled labour—characteristic of the rural workforce.
Compare occupational shifts in rural districts (agriculture → services/manufacturing) to infer whether rural non‑farm employment rose.
Reports increase in 'area under non‑agricultural uses' and expansion of rural settlements, a land‑use pattern often associated with growth of rural non‑farm activities and infrastructure.
A student could link land‑use changes with local industrial/commerce growth (e.g., rural markets, agri‑processing units) to assess growth in rural non‑farm economy.
Documents a fall in poverty and that reforms pulled a lot of population into the growth process, which could reflect increased non‑farm opportunities for some rural households.
Cross‑check timing and location of poverty reduction against rises in rural non‑farm incomes/employment to test whether non‑farm growth contributed.
- Gives explicit annual growth rates for rural employment before and after reform, showing a decline.
- States rural employment decelerated post-reform and turned negative during the later high-growth period.
Defines 'jobless growth' and gives a historical pattern: GDP growth rose while employment growth 'tended to slide down' (employment growth from ~1.5% to ~1%).
A student could check whether the slide in employment growth after 1991 was concentrated in rural employment by comparing pre- and post-1991 employment growth rates from labour surveys.
Notes post‑1990s liberalisation transformed India toward a services economy and that this high growth 'bypasses a large section of people'.
A student could infer that growth concentrated in services (urban/skill‑intensive) might not generate rural jobs, then test this by comparing sectoral employment shares over time (rural vs urban, agriculture vs services).
States services became fast‑growing after 1991 while manufacturing remained small and services 'employ fairly skilled people' whereas India has abundant unskilled labour.
One could extend this to hypothesise that rural (often less‑skilled) workers had fewer opportunities post‑1991, then verify via data on rural employment by sector and skill level.
Documents long‑term decline in agriculture's GDP share (over 50% to 16%) and a fall in agriculture's employment share (70% to ~42%).
A student might use this pattern to ask whether the rate of decline in rural/agricultural employment accelerated after 1991 by examining decade‑wise employment shares.
Argues the rural economy remained weak after 1991, reducing demand for manufactured goods and limiting rural‑led industrial growth.
This suggests a mechanism for declining rural employment growth; a student could look for regional/sectoral employment trends and manufacturing rural linkages after 1991 to test it.
- [THE VERDICT]: Conceptual Sitter disguised as Data Bouncer. Solvable by eliminating anti-development trends (Statements 1 & 2).
- [THE CONCEPTUAL TRIGGER]: Structural Transformation of the Economy. The Lewis Model transition from Agrarian to Industrial/Service economy.
- [THE HORIZONTAL EXPANSION]: Memorize the 'Vectors of Change' (1991–2020): 1) Ag Share in GDP: ~30% -> ~18%. 2) Ag Share in Employment: ~60% -> ~45%. 3) Rural Non-Farm Sector (RNFS): Now contributes >50% of Rural Income. 4) Employment Elasticity: Sharp decline (Jobless Growth). 5) Urbanization: ~25% -> ~34%.
- [THE STRATEGIC METACOGNITION]: Do not memorize absolute numbers (like ₹ per worker). Memorize the *Slope*. Is the graph going up or down? Productivity generally goes up; Rural workforce share generally goes down. Apply this 'Directional Logic' to validate statements.
Economic liberalisation shifted India's output composition toward services, altering where value-added and skilled employment concentrated.
High-yield for UPSC: explains changes in GDP composition, links to urban employment and productivity questions, and frames policy debates on manufacturing vs services-led growth. Useful for answering questions on structural transformation, labor market outcomes, and sectoral productivity.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 8: Inclusive growth and issues > Need for inclusive growth in India > p. 253
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 7: Indian Economy after 2014 > 7.2 Manufacturing > p. 228
Liberalisation led to investment concentrating in specific states, increasing regional imbalances in economic development.
Important for UPSC: informs answers on migration, urbanization pressures, uneven employment growth, and the need for regional policy interventions. Helps connect industrial policy to spatial productivity and labor market outcomes.
- Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 11: Industries > Impact of Liberalisation > p. 80
The 1991 reforms raised average growth rates and corresponded with a decline in measured poverty between the early 1990s and 2004–05.
Valuable for UPSC: links macro growth to welfare outcomes and allows evaluation of whether growth was inclusive; assists in constructing arguments about growth's impact on livelihoods, productivity, and urban-rural differences.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 8: Inclusive growth and issues > 8.13 Rising Income Inequality > p. 276
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 8: Inclusive growth and issues > Need for inclusive growth in India > p. 253
India moved from an agriculture-dominated economy toward services after the early 1990s, changing where growth and jobs were created.
High-yield for UPSC because structural transformation explains trends in GDP composition, employment, and rural incomes; connects to questions on inclusive growth, employment policy, and macroeconomic outcomes. Enables analytical answers on how services-led growth can bypass rural/agricultural sectors.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 8: Inclusive growth and issues > Need for inclusive growth in India > p. 253
Many workers displaced in the 1990s moved into unorganised rural jobs that typically yield lower earnings and weaker protection.
Important for questions on labour markets, social protection and rural poverty; helps link unemployment, informalisation, and policy responses (welfare, rural employment schemes). Useful for evaluating impacts of economic reforms on vulnerable workers.
- Understanding Economic Development. Class X . NCERT(Revised ed 2025) > Chapter 2: SECTORS OF THE INDIAN ECONOMY > How to Protect Workers in the Unorganised Sector? > p. 31
Liberalisation concentrated investment in selected states and sectors, leaving large rural areas and certain states lagging behind.
Crucial for questions on regional disparities, federal development policy, and migration; helps frame policy prescriptions to promote balanced growth and rural development. Enables comparison of state-wise outcomes of liberalisation.
- Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 11: Industries > Impact of Liberalisation > p. 80
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > A comparison with China > p. 219
India moved from an agriculture-dominated economy toward a services-led economy after the early 1990s, changing sectoral contribution to GDP and employment patterns.
High-yield for UPSC: explains broad economic transformation, links liberalisation to sectoral growth and employment outcomes, and helps answer questions on growth-without-employment or sectoral imbalance. Useful for essays/GS mains and economy polity linkages on rural distress and policy responses.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 8: Inclusive growth and issues > Need for inclusive growth in India > p. 253
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 7: Indian Economy after 2014 > 7.2 Manufacturing > p. 228
The 'Feminization of Agriculture'. While the overall rural workforce growth slowed (Statement 4), the share of women in agriculture increased relative to men, as men migrated to urban areas for non-farm work. Expect a statement on 'Male vs Female' trends in rural employment.
Apply the 'Development Axiom': Over a 30-year liberalization period, economies modernize. Modernization means: 1) Productivity rises (Technology), 2) People move to cities (Urbanization). Statement 1 says Rural Productivity *decreased* (Impossible with Green Revolution/Tech). Statement 2 says Rural Workforce Share *increased* (Contradicts Urbanization). Eliminate 1 and 2. Options A and D are gone. You are left with B or C.
Mains GS-3 (Inclusive Growth): The deceleration in rural employment growth (Statement 4) directly links to 'Distress Migration' and the necessity of MGNREGA. It explains why rural distress persists despite rising productivity.