Which of the following statement (s) is/are correct in the context of economic crisis of 1991?

Statement 1: The origin of the financial crisis of 1991 can be traced from the inefficient management of the Indian economy in the 1970s and 1980s.

Statement 2: In the late 1980s, government expenditure began to exceed its revenue by such large margins that meeting the expenditure through borrowings became unsustainable.

Only Statement 2 is correct.

The origin of the financial crisis can be traced from the inefficient management of the Indian economy in the 1980s.

In the late 1980s, government expenditure began to exceed its revenue by such large margins that meeting the expenditure through borrowings became unsustainable. Prices of many essential goods rose sharply. Imports grew at a very high rate without matching growth of exports. As pointed out earlier, foreign exchange reserves declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that needed to be paid to international lenders. Also no country or international funder was willing to lend to India.