In the question given below there are 2 statements marked as Assertion (A) and Reason (R). Choose the correct alternative from the following options.

Assertion (A)- In 1991, the rupee was devalued against the foreign currencies.

Reason (R)- Davaluation was done in 1991 to improve the BOP position of the country .

Both (A) and (R) are true and (R) is the correct explanation.

The correct answer is option 1: Both (A) and (R) are true and (R) is the correct explanation of (A).

In 1991, India devalued the rupee against foreign currencies. This means that the value of the rupee was reduced relative to other currencies. The primary reason for this devaluation was to improve the country's balance of payments (BOP) position.

By devaluing the rupee, India made its exports cheaper for foreign buyers, which encouraged exports and increased foreign exchange earnings. At the same time, imports became more expensive, discouraging imports and reducing foreign exchange outflows. This helped to improve the BOP, which is a measure of a country's trade and financial transactions with the rest of the world.