Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Indian Economic Development: Liberalisation, Privatisation and Globalisation - An Appraisal

Question:

Which of the following was not a cause of economic crisis in 1991?

Options:

Mounting fiscal deficit

Inflationary pressure

Balance of Payment crisis

Low agricultural growth rate

Correct Answer:

Low agricultural growth rate

Explanation:

In 1991, India met with an economic crisis relating to its external debt — the government was not able to make repayments on its borrowings from abroad; foreign exchange reserves, which we generally maintain to import petrol and other important items, dropped to levels that were not sufficient for even a fortnight. The crisis was further compounded by rising prices of essential goods. Thus, high fiscal deficit with poor BOP position in the economy resulted in the economic crisis. Inflation acted as a compounding factor to the crisis.