With reference to the above passage, the following assumptions have been made: 1. Structural and rural transformation is impossible when farms are mainly small and marginal. 2. A good price incentive can trigger investments in agriculture. 3. India needs to build value chains for high-value agri-products like livestock and horticulture. 4. Higher global prices of agricultural commodities are essential for India’s poverty reduction. Which of the above assumptions are valid?

Passage

In India, agriculture still engages about half of its workforce, and about 85 per cent of its farms are small and marginal. Compared to China and Vietnam, which have experienced fast structural and rural transformation, India’s story is of slow transformation. As a result, poverty reduction in India was at much slower pace during 1988-2014, compared to China and Vietnam. India’s poverty reduction was slow during 1988-2005, but during 2005-2012, it accelerated dramatically–almost three times faster than during the earlier period. What did India do during this period? Research reveals that the relative price scenario changed significantly (by more than 50%) in favour of agriculture in the wake of rising global prices. This boosted private investments in agriculture by more than 50%. As a result, agri-GDP growth touched 4.1% during 2007-2012 as against 2.4% during 2002-2007. The net surplus of agri-trade touched $25 billion in 2013-2014; real farm wages rose by 7% per annum. All this led to unprecedented fall in poverty.

Question

CSATMediumPrelims 2020Comprehension

With reference to the above passage, the following assumptions have been made:

Structural and rural transformation is impossible when farms are mainly small and marginal.
A good price incentive can trigger investments in agriculture.
India needs to build value chains for high-value agri-products like livestock and horticulture.
Higher global prices of agricultural commodities are essential for India’s poverty reduction.

Which of the above assumptions are valid?

Explanation

Statement 1 is incorrect. The passage mentions that India has a slow structural transformation compared to China and Vietnam, but it does not state that transformation is impossible. Hence, this assumption is invalid.

Statement 2 is correct. The passage explicitly states that a significant change in the relative price scenario (by more than 50%) in favor of agriculture led to a more than 50% increase in private investment. This confirms that price incentives can drive agricultural investments. Hence, this assumption is valid.

Statement 3 is correct. While the passage does not explicitly mention this, the context suggests that diversification and improving agricultural value chains could be a logical step to sustain growth and poverty reduction. Given India's focus on agriculture, this assumption is valid.

Statement 4 is incorrect. The passage mentions that rising global prices contributed to poverty reduction between 2005-2012, but it does not state that such prices are essential. Other factors, such as domestic policies and investments, also play a role. Hence, this assumption is invalid.