Question

Write a short note on foreign exchange reforms.

Answer 1

The first important reform in the external sector was made in the foreign exchange market.
In 1991, as an immediate measure to resolve the Balance of payments (BoP) crisis, the rupee was devalued against foreign currencies.
This led to an increased in the inflow of foreign exchange. After liberalisation policy of 1991:

(i) Approval was given for direct foreign investment up to 51% foreign equity in high priority industries.
(ii) Automatic permission was given for foreign technology agreements in high priority industries up to a lump sum payment of Rs. 1 crore.