Previous Year Question
With reference to the Indian economy after the 1991 economic liberalisation, consider the following statements:
Worker productivity (₹ per worker at 2004-05 prices) increased in urban areas while it decreased in rural areas.
The percentage share of rural areas in the workforce steadily increased.
In rural areas, the growth in the non-farm economy increased.
The growth rate in rural employment decreased.
Which of the statements given above are correct?
1 and 2 only
3 and 4 only
3 only
1, 2 and 4 only
Correct Answer: B
Detailed Solution
After 1991, economic liberalisation, industrialisation, urbanisation and diversification of the rural economy accelerated in India. The rural economy was no longer based exclusively on agriculture; the importance of construction, manufacturing, trade, transport and other services increased.
Statement 1 is incorrect. Worker productivity did not increase only in urban areas; it also increased in rural areas after economic liberalisation. The level of rural productivity may remain lower than urban productivity, but that does not mean that rural worker productivity declined.
Worker productivity generally represents the real output or gross value added produced per worker. It can be expressed as:
Agricultural technology, irrigation, mechanisation, rural roads, communication, construction and the expansion of non-farm activities contributed to an increase in output per rural worker.
Statement 2 is incorrect. The percentage share of rural areas in India’s total workforce did not steadily increase. Urbanisation, rural-to-urban migration and the expansion of industry and services in urban areas produced a long-term decline in the rural share of the workforce.
Furthermore, the presence of surplus labour and low incomes in agriculture encouraged workers to move towards construction, manufacturing, transport, trade and urban services.
Statement 3 is correct. The rural non-farm economy expanded after economic liberalisation. The rural non-farm economy includes activities other than agriculture that generate income and employment, such as:
Construction;
Rural manufacturing and processing;
Trade and repair services;
Transport and storage;
Education, healthcare and other services;
Self-employment and small enterprises.
Rural roads, electricity, communication, market connectivity and closer economic linkages with urban areas facilitated the expansion of rural non-farm activities. Construction, in particular, became an important source of employment for workers moving out of agriculture.
Statement 4 is correct. The growth rate of rural employment declined. Even though rural output and productivity increased, employment did not grow at the same rate. Mechanisation of agriculture, small landholdings, limited labour absorption in agriculture and jobless or employment-light growth contributed to this outcome.
The rural workforce shifted from agriculture towards non-farm activities, but the employment generated by the non-farm sector was not sufficient to absorb all workers leaving agriculture. Consequently, rural employment growth weakened.