Question 59 from UPSC CSE 2017 - Economics

Question

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:

Accepted Answer

Correct Option: B. 2, 3, and 4 only

Strategy: Assess each statement in the context of post-1991 reforms. Eliminate statement 1, as the share of agriculture in GDP has fallen, not increased. Confirm that the other trends—increased export share, FDI, and forex reserves—are well-documented, which rules out options containing statement 1 and identifies option B as correct.

Key Info: ## India's Economic Liberalization (1991)
*   In response to a balance of payments crisis, India adopted wide-ranging structural reforms aimed at liberalizing, privatizing, and globalizing the economy.

**Agricultural Share in GDP:**
*   Since 1991, the relative share of agriculture in GDP has declined markedly—falling from over 30% in 1990-91 to less than 20% in recent years. This reflects rapid expansion in industry and services.

**Exports' Share in World Trade:**
*   India's share of world merchandise exports rose from less than 0.5% in 1991 to over 1.7% by recent years, due to increased competitiveness, policy reforms, and integration with the global economy.

**FDI Inflows:**
*   Post-liberalization, the government systematically eased FDI norms. Annual foreign direct investment inflows increased from under $100 million in 1990-91 to over $50 billion in recent years, making India a major global FDI destination.

**Foreign Exchange Reserves:**
*   India's foreign exchange reserves were under $6 billion in 1991. Successive policy changes and export growth propelled reserves to well over $500 billion by early 2020s, seen as a mark of economic stability and resilience.

**Key Institutions & Acts:**
*   Liberalization measures included industrial delicensing, reduced tariff barriers, currency devaluation, removal of controls on investments and imports, and initiatives under WTO framework.
*   Important institutions involved included RBI, Department of Economic Affairs, and key reforms targeted at the Import-Export Policy and FEMA.

The reforms are widely credited with accelerating GDP growth, modernizing the economy, and increasing global economic engagement.

Answer

Option A: 1 and 4 only

Answer

Option C: 2 and 3 only

Answer

Option D: 1, 2, 3, and 4