Prelims · Economy & social development · 37 questions

Agriculture economy, MSP & food security

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Asked in 7 of 11 years · most in 2020 (6)

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Prelims 2020 · Q58

Hard

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?

Answer & explanation

Answer: (b) 3 and 4 only

After liberalisation, rural India's non-farm economy grew faster while rural employment growth slowed and even turned negative, so statements 3 and 4 are correct. Statements 1 and 2 are wrong: output per worker rose in rural areas too, and the rural share of the workforce kept falling.

✗ 1. Rural productivity did not fall. Rural output at 2004-05 prices rose from Rs 3,199 billion (1970-71) to Rs 21,107 billion (2011-12) while rural employment rose only from 191 to 336 million, so output per rural worker went up from about Rs 16,700 to about Rs 62,800 (our calculation from these figures).
✗ 2. The rural share of the workforce fell, from 84.1 per cent in 1970-71 to 70.9 per cent in 2011-12, as urbanisation proceeded.
✓ 3. Growth of rural non-farm output rose from 5.70 per cent a year (1971-94) to 7.93 per cent (1994-2005) and 9.21 per cent (2005-12), while agriculture lagged.
✓ 4. Total rural employment growth fell from 2.16 per cent a year (1973-94) to 1.45 per cent (1994-2005) and turned negative (-0.28 per cent) in 2005-12.

Remember · Since liberalisation, rural non-farm output has grown faster and faster, but rural employment growth has fallen; the rural share of India's workforce has kept declining.

Sources

NITI Aayog Discussion Paper, Changing Structure of Rural Economy of India (Chand, Srivastava and Singh, November 2017) ↗ “During the post-reform period (1993-94 and 2004-05), growth in agricultural sector decelerated to 1.87 per cent, whereas growth rate in non-farm economy accelerated to 7.93 per cent. … After 2004-05, the rural areas have witnessed negative growth in employment in- spite of high growth in output. … However, steady transition to urbanization over the years is leading to the decline in the rural share in population, workforce and GDP of the country. … India‟s rural economy expanded from Rs. 229 billion to Rs. 34167 billion at current prices and from Rs. 3199 billon to Rs. 21107 billion at 2004-05 prices. In the same period, employment expanded from 191 million to 336 million.”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

Prelims 2020 · Q59

Medium

Consider the following statements:

1.In terms of short-term credit delivery to the agriculture sector, District Central Cooperative Banks (DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks.
2.One of the most important functions of DCCBs is to provide funds to the Primary Agricultural Credit Societies.

Which of the statements given above is/are correct?

Answer & explanation

Answer: (b) 2 only

Only statement 2 is correct: DCCBs are the middle tier of the short-term cooperative credit structure and channel funds to the village-level Primary Agricultural Credit Societies (PACS). Statement 1 fails because commercial banks, not cooperative banks, supply most crop loans.

✗ 1. NABARD's analysis of crop loans puts commercial banks at 65.30 per cent and all cooperative banks together at 17.97 per cent in 2019-20, with Regional Rural Banks at 16.73 per cent. DCCBs are only one part of the cooperative share, so they do not out-deliver Scheduled Commercial Banks.
✓ 2. The short-term cooperative credit structure runs State Cooperative Banks, then DCCBs at district level, then PACS at village level. PACS are refinanced through DCCBs and State Cooperative Banks, so DCCBs supply them with funds.

Remember · Short-term cooperative credit flows StCB, then DCCB, then PACS (village). Commercial banks, not cooperative banks, supply most short-term (crop) farm credit.

Sources

NABARD, Trends and Patterns in Agriculture Credit in India (Vinod Kumar, 2021) ↗ “However, the share of Cooperative Banks and CBs has declined to 17.97 per cent and 65.30 per cent in 2019-20 and that for RRBs had improved significantly (16.73%) in 2019-20.”
NABARD Annual Report, Empowering Rural Financial Institutions ↗ “The short-term cooperative credit structure (STCCS) consists of state cooperative banks (StCBs) at the state/apex level, district central cooperative banks (DCCBs) at the district level, and primary agriculture credit societies (PACS) at the village level.”
PIB, Ministry of Cooperation: Utility of PACS ↗ “These are refinanced by NABARD through 351 District Central Cooperative Banks (DCCBs) and 34 State Cooperative Banks (StCBs).”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

Prelims 2020 · Q61

Hard

In India, which of the following can be considered as public investment in agriculture?

1.Fixing Minimum Support Price for agricultural produce of all crops
2.Computerization of Primary Agricultural Credit Societies
3.Social Capital development
4.Free electricity supply to farmers
5.Waiver of agricultural loans by the banking system
6.Setting up of cold storage facilities by the governments

Select the correct answer using the code given below:

Answer & explanation

Answer: (c) 2, 3 and 6 only

Public investment in agriculture means government spending that builds lasting capacity, such as institutions and infrastructure. Computerising PACS and building cold storage do this, whereas MSP, free electricity and loan waivers are price support or subsidies that add no new capacity.

✗ 1. MSP is a price-support instrument, not investment. NITI Aayog treats price support as a separate policy tool from subsidies and public investment.
✓ 2. Primary Agricultural Credit Societies are cooperative institutions, and public spending on cooperative institutions counts as public investment. Computerising them is a Government of India project with its own outlay, and it builds institutional capacity.
✓ 3. UPSC's official key treats this statement as correct; we could not confirm the detail from an official source, so we do not explain it here. It is a different kind of item from the price-support and subsidy options.
✗ 4. Free or cheap power to farmers is a subsidy; NITI Aayog lists power subsidy (borne by State Governments) among the major subsidies, not investments.
✗ 5. A loan waiver only writes off existing debt and creates no new asset or capacity; it is a fiscal relief measure, not investment.
✓ 6. Cold storage is physical post-harvest infrastructure that cuts wastage and raises farmers' realisation; government schemes finance it as infrastructure investment.

Remember · Public investment in agriculture = asset- and institution-building spending (irrigation, R&D, cooperatives, storage). MSP, free power and loan waivers are support or subsidies.

📘 Read it in NCERT: Class 12 Indian Society, Ch 5 (practise this chapter) · Class 11 Indian Economic Development, Ch 3 (practise this chapter)

Sources

NITI Aayog, From Green Revolution to Amrit Kaal: Agriculture (2023), Section 1.6 Subsidies and Investments ↗ “The second policy instrument – public investment in agriculture – includes public expenditure on medium, major and minor irrigation, agriculture R&D and extension, cooperative institutions, and land and soil improvement programmes. … The other major subsidies provided to the agriculture sector are: interest subvention on institutional agricultural credit, subsidy on crop insurance and subsidy on power supply to agriculture (which is borne by State Governments).”
PIB, Ministry of Cooperation: Primary Agriculture Cooperative Credit Societies ↗ “Centrally Sponsored Project for Computerization of PACS entails bringing all the functional PACS onto an ERP (Enterprise Resource Planning) based common national software, linking them with NABARD through State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs)”
PIB, Ministry of Agriculture and Farmers Welfare: Agriculture Infrastructure Fund ↗ “Infrastructure such as warehouses, cold storage, sorting and grading units, and ripening chambers enhances farmers’ ability to access wider markets and improve value realization, thereby boosting their income.”
NCERT Class 12 · Indian Society, Chapter 5 “social capital in the form of networks of contacts and social associations (Bourdieu 1986).”
NCERT Class 11 · Indian Economic Development, Chapter 3 “public investment in agriculture sector especially in infrastructure, which includes irrigation, power, roads, market linkages and research and extension”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). Permalink ·

Prelims 2020 · Q63

Easy

Which of the following factors/policies were affecting the price of rice in India in the recent past?

1.Minimum Support Price
2.Government's trading
3.Government's stockpiling
4.Consumer subsidies

Select the correct answer using the code given below:

Answer & explanation

Answer: (d) 1, 2, 3 and 4

All four affect rice prices. The Government assures MSP, the Food Corporation of India (FCI) holds buffer stocks and also sells rice in the open market, and subsidised grain through the Public Distribution System (PDS) changes what consumers pay.

✓ 1. MSP is an assured price for agricultural products, including paddy, and works as a floor for the rice price.
✓ 2. The Government trades in rice itself: in 2020-21, up to 9 December 2020, FCI sold 11.02 lakh tonnes of rice in the open market under the Open Market Sale Scheme (Domestic) to moderate prices.
✓ 3. FCI maintains buffer stocks of wheat and rice; buying for and releasing from these stocks changes market supply.
✓ 4. Foodgrains distributed through the PDS are provided at a subsidised rate to the poor, which shapes demand and prices of rice.

Remember · MSP, FCI buffer stocks, government open-market sales and subsidised PDS grain all shape rice prices in India.

📘 Read it in NCERT: Class 11 Indian Economic Development, Ch 5 (practise this chapter) · Class 11 Indian Economic Development, Ch 5 (practise this chapter)

Sources

NCERT Class 11 · Indian Economic Development, Chapter 5 “policy instruments like (i) assurance of minimum support prices (MSP) for agricultural products (ii) maintenance of buffer stocks of wheat and rice by Food Corporation of India and (iii) distribution of food grains and sugar through PDS.”
NCERT Class 11 · Indian Economic Development, Chapter 5 “These instruments are aimed at protecting the income of the farmers and providing foodgrains at a subsidised rate to the poor.”
PIB, Year End Review 2020: Department of Food and Public Distribution ↗ “Through Open Market Sale Scheme (Domestic) (OMSS(D)) 2020-21, a total quantity of 7.10 Lakh MT of wheat and 11.02 Lakh MT of rice have been sold in the open market till 2nd tender of December, 2020”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

Prelims 2020 · Q66

Medium

Under the Kisan Credit Card scheme, short-term credit support is given to farmers for which of the following purposes?

1.Working capital for maintenance of farm assets
2.Purchase of combine harvesters, tractors and mini trucks
3.Consumption requirements of farm households
4.Post-harvest expenses
5.Construction of family house and setting up of village cold storage facility

Select the correct answer using the code given below:

Answer & explanation

Answer: (b) 1, 3 and 4 only

The short-term limit under the Kisan Credit Card covers crop cultivation, post-harvest expenses, produce marketing loans, the consumption needs of the farmer's household and working capital for maintaining farm assets. Buying machinery or building assets such as a cold store is investment credit, which forms the separate long-term portion, so only 1, 3 and 4 are correct.

✓ 1. Working capital for maintenance of farm assets and allied activities is one of the listed purposes and is part of the short-term limit.
✗ 2. Buying combine harvesters, tractors or mini trucks is investment in assets. The KCC's investment credit forms the long-term limit portion, not the short-term one.
✓ 3. Consumption requirements of the farmer household are a listed purpose and count in the short-term limit.
✓ 4. Post-harvest expenses are a listed purpose and count in the short-term limit.
✗ 5. Building a family house is not among the listed purposes, and setting up a cold storage facility is an investment (long-term) need rather than a short-term one.

Remember · KCC short-term limit: crop cultivation, post-harvest expenses, produce marketing loan, household consumption and farm-asset maintenance. Asset purchases fall under the long-term investment component.

Sources

RBI, Master Circular: Kisan Credit Card (KCC) Scheme (July 2018) ↗ “b. Post-harvest expenses; c. Produce marketing loan; d. Consumption requirements of farmer household; e. Working capital for maintenance of farm assets and activities allied to agriculture; … Note: The aggregate of components ‘a’ to ‘e’ above will form the short term credit limit portion and the aggregate of components under ‘f’ will form the long term credit limit portion.”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

Prelims 2020 · Q69

Medium

Consider the following statements:

1.In the case of all cereals, pulses and oil-seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India.
2.In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise.

Which of the statements given above is/are correct?

Answer & explanation

Answer: (d) Neither 1 nor 2

Neither statement is correct. The Government buys at MSP in approved quantities, not unlimited amounts of every crop in every State, and MSP is only a floor: it is the price at which the Government agrees to buy, so market prices can rise above it.

✗ 1. Procurement is planned and approved in specified quantities. For example, in Kharif Marketing Season 2019-20 the Government approved procurement of 3,49,250 tonnes of coarse grains, so buying at MSP is not unlimited for all cereals, pulses and oilseeds in every State or UT. Today's rule (PIB): under the Price Support Scheme, procurement of notified pulses, oilseeds and copra is sanctioned up to 25% of a State's production at first, with the ceiling lifted only for some pulses such as tur, urad and masur.
✗ 2. A support price helps ensure a minimum income to farmers because it is the price at which the Government agrees to buy. It is a floor, not a ceiling, so open-market prices can and do rise above MSP.

Remember · MSP is a floor price at which the Government agrees to buy, not a ceiling, and it does not mean unlimited buying of every crop in every State.

📘 Read it in NCERT: Class 12 Indian Society, Ch 4 (practise this chapter)

Sources

NCERT Class 12 · Indian Society, Chapter 4 “Support prices help to ensure a minimum income for farmers because they are the prices at which the government agrees to buy agricultural commodities.”
Economic Survey 2019-20, Volume 2, Chapter 7 Agriculture and Food Management ↗ “(iii) During the KMS 2019-20, procurement of 3,49,250 Metric Tonnes (MT) of coarse grains was approved.”
PIB, Ministry of Agriculture and Farmers Welfare: Empowering Farmers Through PM-AASHA (Price Support Scheme, 2024-25 onwards) ↗ “the sanction for the procurement of notified Pulses, Oilseeds and Copra under PSS are given to the State/UT initially up to a maximum of 25% of the production of the State for that particular season.”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

Prelims 2020 · Q86

Medium

With reference to pulse production in India, consider the following statements:

1.Black gram can be cultivated as both kharif and rabi crop.
2.Green-gram alone accounts for nearly half of pulse production.
3.In the last three decades, while the production of kharif pulses has increased, the production of rabi pulses has decreased.

Which of the statements given above is/are correct?

Answer & explanation

Answer: (a) 1 only

Only statement 1 is correct: black gram (urad) is sown in both the kharif and rabi seasons. Green gram (moong) gives only about a tenth of India's pulses, and rabi pulses have not shrunk; they now make up the larger share of production.

✓ 1. Government crop statistics list urad separately for the kharif and the rabi season, so it is grown in both.
✗ 2. ICAR-IIPR says mungbean (green gram) accounts for 10% of India's pulse production; it is gram (chickpea), at about 10.4 of 23.4 million tonnes, that comes close to half.
✗ 3. Rabi pulses have not decreased: in the 2016-17 to 2020-21 average, rabi pulses gave 14.69 million tonnes against 8.73 million tonnes from kharif pulses.

Remember · Gram (chickpea) is about 45% of India's pulses; moong is about 10% and urad about 11%; rabi pulses give the larger share.

Sources

Agricultural Statistics at a Glance 2022, Table 2.1 (normal estimates 2016-17 to 2020-21), Department of Agriculture & Farmers Welfare ↗ “Gram Rabi 9.86 10.44 1059 Total Pulses Kharif 14.17 8.73 616 Rabi 14.94 14.69 983 Total 29.10 23.41 805 … Urad Kharif 386 412 475 419 363 557 523 606 490 516 459 626 632 500 359 469 534 Rabi 540 640 405 506 586 489 621 682 768 891 773 656 798 796 904 778 878”
Mungbean, ICAR-Indian Institute of Pulses Research (Internet Archive copy) ↗ “The Mungbean alone accounts for 10% of production and 16% of area for all pulses.”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

Prelims 2020 · Q94

Medium

With reference to chemical fertilizers in India, consider the following statements:

1.At present, the retail price of chemical fertilizers is market-driven and not administered by the Government.
2.Ammonia, which is an input of urea, is produced from natural gas.
3.Sulphur, which is a raw material for phosphoric acid fertilizer, is a by-product of oil refineries.

Which of the statements given above is/are correct?

Answer & explanation

Answer: (b) 2 and 3 only

Statements 2 and 3 are correct; statement 1 is not. Urea, India's main fertiliser, is sold at a maximum retail price fixed by the Government, so the retail price of chemical fertilizers is not wholly market-driven.

✗ 1. Urea is sold to farmers at a statutorily notified Maximum Retail Price, whatever its cost of production. Only phosphatic and potassic fertilizers (under the Nutrient Based Subsidy scheme) have prices set by the companies, so 'not administered' is not true for fertilizers in general.
✓ 2. Ammonia is made from hydrogen and nitrogen, and natural gas is the main source of the hydrogen (steam reforming). Ammonia is then reacted to make urea.
✓ 3. India's elemental sulphur output is largely recovered as a by-product at petroleum refineries. It is turned into sulphuric acid, which is used to make phosphoric acid from rock phosphate.

Remember · Urea has a Government-fixed MRP; P&K prices are company-set under the NBS scheme. Ammonia comes from natural gas; by-product sulphur comes from refineries.

Sources

PIB, Ministry of Chemicals and Fertilizers: urea MRP and NBS (29 Nov 2024) ↗ “Urea is provided to the farmers at a statutorily notified Maximum Retail Price (MRP) irrespective of the cost of production.”
IEA, Ammonia Technology Roadmap: Executive summary ↗ “Just over 70% of ammonia production is via natural gas-based steam reforming, while most of the remainder is via coal gasification”
Indian Bureau of Mines, Indian Minerals Yearbook 2020: Sulphur and Pyrites ↗ “The domestic production of elemental sulphur is limited to by-product recoveries from petroleum refineries and fuel oil used as feedstock for manufacturing fertilizer.”

Question and answer: UPSC's official GS Paper I (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

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