Which among the following were the possible factors for the 1991 economic crisis of India 1 High exp...........

Economic Affairs Public Finance and Debt Management

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Which among the following were the possible factors for the 1991 economic crisis of India?

1. High expenditure in populist policies by the government.

2. Non profitable Public Sector Undertakings.

3. Declining domestic Public debt while external debt was increasing.

Select the correct answer using the code given below.

1 only

2 and 3 only

1 and 2 only

1, 2 and 3

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Explanation:

1 and 2 only

High expenditure in populist policies by the government.

This statement is correct. The government's high expenditure on populist policies contributed to the fiscal deficit and strained the country's finances. This spending, without corresponding revenue generation, exacerbated economic imbalances.

Non-profitable Public Sector Undertakings (PSUs).

This statement is also correct. Many Public Sector Undertakings (PSUs) were operating at losses due to inefficiencies, mismanagement, and lack of competitiveness. These non-profitable PSUs became a burden on the government's finances and contributed to the economic crisis.

Declining domestic Public debt while external debt was increasing.

This statement is not directly linked to the 1991 economic crisis in India. While the structure of public debt and external debt levels can influence economic stability, the 1991 crisis was primarily driven by factors such as fiscal mismanagement, balance of payments issues, and the need for economic reforms.

Therefore, only statements 1 and 2 are correct

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