In 1991, the country met with an economic crisis which related to increased external debt. Due to which of the following reason, the crises compounded drastically?

Rising prices of essential goods

The correct answer is Option 3: Rising prices of essential goods

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 petroleum 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. All these led the government to introduce a new set of policy measures which changed the direction of our developmental strategies.