Which of the following statements correctly describes the process which India took to initiate the "Foreign exchange reforms"?

The government decided to introduce the fixed exchange rate system The rupee is devalued against the foreign currency Both 1 and 2 None of the above

The rupee is devalued against the foreign currency

The first important reform in the external sector was made in the foreign exchange market. In 1991, as an immediate measure to resolve the balance of payments crisis, the rupee was devalued against foreign currencies. This led to an increase in the inflow of foreign exchange. It also set the tone to free the determination of rupee value in the foreign exchange market from government control. Now, more often than not, markets determine exchange rates based on the demand and supply of foreign exchange.