Consider the following statements about the economic crisis that led the Government of India to announce economic reforms in 1991:
(A) During the crisis, non-resident Indians (NRIs) were withdrawing their deposits at an alarmingly high rate.
(B) During the crisis, the confidence of the international financial institutions was badly shaken.
(C) During the crisis, the Government leased gold out of its stock to the Reserve Bank of India to sell it with a repurchase option.
(D) During the crisis, the Reserve Bank of India was allowed to pledge gold to the Bank of England to raise a loan.
(E) During the crisis, the country was on the verge of defaulting on its domestic financial obligations.
How many of the above statements are correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Three
(A) During the crisis, non-resident Indians (NRIs) were withdrawing their deposits at an alarmingly high rate. — Correct. NRIs were taking their money out of Indian banks very fast, which made the shortage of foreign exchange worse.
(B) During the crisis, the confidence of the international financial institutions was badly shaken. — Correct. In just over a year, India’s creditworthiness rating fell from AAA to BB+.
(C) During the crisis, the Government leased gold out of its stock to the Reserve Bank of India to sell it with a repurchase option. — Incorrect. In May 1991, the Government leased 20 tonnes of gold to the State Bank of India, which could sell it and buy it back after six months.
(D) During the crisis, the Reserve Bank of India was allowed to pledge gold to the Bank of England to raise a loan. — Correct. The Reserve Bank of India pledged 47 tonnes of gold to the Bank of England for a loan of $600 million.
(E) During the crisis, the country was on the verge of defaulting on its domestic financial obligations. — Incorrect. The danger was a default on international financial obligations, not domestic ones. The country was close to failing to pay what it owed to other countries and foreign lenders.
NCERT (2026-27 Edition):
|
