Economics · Economy

The pre-liberalization era (1950–1990) in India was characterized by the 'License-Permit-Quota Raj'. Which of the following was a primary reason for the Balance of Payments crisis in 1991 that necessitated LPG reforms?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1A massive surplus in the Current Account due to high export growth
2Complete privatization of all Public Sector Undertakings during the 1980s
3High fiscal deficit, rising inflation, and a sharp decline in foreign exchange reserves exacerbated by the Gulf War✓
4Excessive foreign exchange reserves leading to currency appreciation

Correct answer

High fiscal deficit, rising inflation, and a sharp decline in foreign exchange reserves exacerbated by the Gulf War

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