(B) The proportion of literate population in the seven years and above
Literacy Rate measures the proportion of literate population in the 7-and-above age group.
Source: Income and Other Criteria, Chapter 1
The textbook gives the exact definition in Table 1.4's explanation box. Examiners expect you to reproduce this definition precisely. Options C and D describe school attendance/infrastructure, not literacy rate. Option A refers to global literate population (too vague). Always learn the textbook definitions of key terms like IMR, Literacy Rate, and Net Attendance Ratio word-for-word.