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 :
- A.1 and 4 only
- B.2, 3 and 4 only
- C.2 and 3 only
- D.1, 2, 3 and 4
Correct answer
Explanation
The correct answer is B, 2, 3 and 4 only. The reforms of 1991, launched during a balance of payments crisis, opened India to trade and foreign investment, and three of the listed changes followed. India's share of world merchandise exports, around half a percent in the early 1990s, has risen steadily since, helped by lower tariffs and a market-based exchange rate, so statement 2 is correct. Foreign direct investment, negligible before 1991, grew to many billions of dollars a year once automatic approval routes were opened, so statement 3 is correct. Foreign exchange reserves, which in mid-1991 could pay for only a few weeks of imports, grew to hundreds of billions of dollars, so statement 4 is correct. Statement 1 is wrong: as industry and especially services grew faster, the share of agriculture in GDP fell steadily rather than rising. Option A is wrong because it includes statement 1 and leaves out 2 and 3. Option C is wrong because it leaves out the rise in reserves. Option D is wrong because it includes statement 1. Exam tip: after 1991 exports, FDI and reserves rose, while agriculture's share in GDP fell.
Practice Questions
View allAmong the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?
- A.Spices
- B.Fresh fruits
- C.Pulses
- D.Vegetable oils
Show answer
Edible vegetable oils are India's largest agricultural import by value, and they have stayed at the top since well before this question was set.
Read the full explanation →'Broad-based Trade and Investment Agreement (BTIA)' is sometimes seen in the news in the context of negotiations held between India and
- A.European Union
- B.Gulf Cooperation Council
- C.Organization for Economic Cooperation and Development
- D.Shanghai Cooperation Organization
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The Broad-based Trade and Investment Agreement was the name given to the free trade agreement that India and the European Union began negotiating in 2007.
Read the full explanation →Consider the following statements : 1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries. 2. In terms of PPP dollars, India is the sixth largest economy in the world. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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Statement 1 is the definition of purchasing power parity, while statement 2 understates India's position. A PPP exchange rate is the rate at which the currency of one country would have to be converted into that of another to buy the same basket of goods and services in both.
Read the full explanation →What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'? 1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. 2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves. 3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future. Select the correct answer using the code given below :
- A.1 only
- B.2 and 3 only
- C.1 and 3 only
- D.1, 2 and 3
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The main and certain advantage of GST is that it subsumes many indirect taxes into one and creates a common national market.
Read the full explanation →Which one of the following is not a strategy in the Rainfed Area Development (RAD) scheme of India?
- A.Diversified farming
- B.Soil health management
- C.Adaptation of cluster-based approaches
- D.Optimizing canal irrigation
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Rainfed Area Development is meant for farms that depend on rain, not on canals, so improving canal irrigation is not one of its strategies.
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