Question

Which of the following statements are true with regard to the 1991 foreign currency crisis of India?

• A. India faced an external aggression during the financial crisis of 1991.
• B. India's foreign currency reserves deteriorated.
• C. There was a rise in international price of oil.
• D. A series of five-year plans had failed before 1991.

Answer 1

Answer: (B), (C), (D)

A series of five-year plans had failed before 1991.

The Indian economy was on the verge of collapse in 1991 due to a series of economic policy failures. Besidesthis, the rising international oil prices made imports very expensive. With a deteriorated foreign currency reserve, India did not have sufficient money to support the imports of essential commodities. All these factors led to the foreign currency crisis.