Consider the following statements about India rsquo s approach in dealing with 1991 crisis 1 India a...........

Environment and Ecology Environment- Institutional Structure

Consider the following statements about India’s approach in dealing with 1991 crisis.

1. India approached the international bank for reconstruction and development popularly known as IMF for loan to manage the crisis.

2. India came up with new economic policies which were based on the conditionality of international institutions.

3. Conditionality of international institutions was not as a punishment but were towards creating more competitive environment in the economy.

Select the correct ones.

All the above

2 and 3

1 and 2

1 and 3

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Explanation:

The economic reform of 1991 brought the global transition in India. The Balance of Payment crisis followed by pledging of Gold reserves, taking loan from IMF and other structural adjustment programme (sponsored by IMF and World Bank) were the initial steps towards the economic reforms that were launched. The BOP crisis was the result of decades of imprudent economic policies that India followed. The institutional arrangements of the economy, pre 1991, were adequate then but were eventually deteriorating the fiscal situation of the country. The role of fiscal policy in India’s history is significant. In 1991, India ran into an unsustainable deficit in balance of payments. The country ran into large deficits for long time and as a result faced the balance of payment crisis.

To combat the crisis, the government took various fiscal, monetary, trade, finance and industrial measures. Since mid-1991, the Indian economy took a departure from the past policies prevailed post-independence. Liberalisation, Privatisation and Globalisation are the words that strike the most listening to the reforms that took place post crisis. India’s economy paved itself into a new regime through new economic policy (NEP). It is necessary to know about the economic compulsion that lead to such crisis which lead to these reforms.