In 1991 the Balance of payment crisis was observed when the Indian rupee was devalued which in turn led to _____________ ?

Increase in the inflow of Foreign exchange

The correct answer is Increase in the inflow of Foreign exchange.

The balance of payments crisis in India in 1991 was a result of a number of factors, including high inflation, a large trade deficit, and a shortage of foreign exchange reserves. The government devalued the Indian rupee in an attempt to reduce the trade deficit and boost exports. This move was successful in increasing the inflow of foreign exchange, as it made Indian goods more competitive in international markets.

Here is a more detailed explanation of why devaluing the rupee can increase the inflow of foreign exchange:

• Devaluation makes exports cheaper: When a country's currency depreciates, its exports become cheaper for foreign buyers. This makes them more attractive to foreign consumers, which can lead to an increase in exports and an inflow of foreign exchange.
• Devaluation makes imports more expensive: When a country's currency depreciates, its imports become more expensive for domestic consumers. This can discourage imports and help to reduce the trade deficit.