Question

Q. Which of the following was the immediate trigger behind the introduction of New Economic Policy, 1991?

• A.
  High fiscal deficit
• B.
  Failure of big banks in India
• C.
  Foreign exchange crisis
• D.
  Shortage of food grains

Answer 1

The correct option is C

Foreign exchange crisis
Explanation:

In 1991, due to the government’s inability to make repayments of the foreign borrowing, India met with an economic crisis relating to its external debt. Foreign exchange reserves dropped to a level that were not sufficient for even a fortnight, which India generally maintained to import petrol and other important items. This was the immediate reason for the introduction of NEP (New Economic Policy) in 1991.