India agreed to the conditional ties of World Bank and IMF and announced the New Economic Policy NEP...........

Economic Affairs Others

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India agreed to the conditional ties of World Bank and IMF and announced the New Economic Policy (NEP) 1991 to avert

A Balance of Payments (BoP) crisis

A situation of hyperinflation in the economy

A situation of monetary depression in the Indian economy

The ill spread effects of the Asian Financial Crisis

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Explanation:

Foreign exchange reserves in the late 1980s declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that needs to be paid to international lenders. Therefore, a BoP crisis was looming to avert which India resorted to the help of WB and IMF.

Other objectives of the policy were to tackle high inflation, mismanagement of the economy, revive growth prospects etc. However, the most appropriate reason is to avert a BoP crisis.

The NEP aimed towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. It can broadly be classified into two groups: the stabilization measures and the structural reform measures.