Given below are two statements:
Statement I: India had to borrow from the IMF and the World Bank to set right its balance of payments crisis.
Statement II: In 1991, India’s foreign exchange reserves dropped to levels that were not sufficient for even a fortnight.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Both Statement I and Statement II are true.
Statement I: India had to borrow from the IMF and the World Bank to set right its balance of payments crisis. — True. India borrowed from these agencies to set right its balance of payments crisis, and they in turn pushed reforms on India.
Statement II: In 1991, India’s foreign exchange reserves dropped to levels that were not sufficient for even a fortnight. — True. In the 1991 crisis, India could not repay its foreign borrowings, and its reserves fell to less than a fortnight’s imports.
This question uses Comparative Development Experiences of India and its Neighbours and Liberalisation, Privatisation and Globalisation: An Appraisal together.
NCERT (2026-27): “8.6 Development Strategies — an Appraisal … The reasons for the slow-down of growth and re-emergence of poverty in Pakistan’s economy, as scholars put it, are agricultural growth and food supply situation were based not on an institutionalised process of technical change but on good harvest. When there was a good harvest, the economy was in good condition, when it was not, the economic indicators showed stagnation or negative trends. You will recall that India had to borrow from the IMF and World Bank to set right its balance of payments crisis; foreign exchange is an essential component for any country and it is important to know how it can be earned. …” Liberalisation, Privatisation and Globalisation: An Appraisal: “3.1 Introduction … 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. …” |