Economic Reforms in India

The Indian government introduced stabilisation measures in the form of a New Economic Policy to deal with the economic crisis of 1991. This policy targeted: Structural reform measures, Deregulation of the Industrial Sector and Financial Sector Reforms. The financial sector includes financial institutions such as commercial banks, investment banks, stock exchange operations and foreign exchange market.

The reform policies led to the establishment of private sector banks, Indian as well as foreign. The foreign investment limit in banks was raised to around 74 per cent. This coincided with: Tax Reforms, Foreign exchange reforms, Trade and Investment Policy Reforms, and privatization.

The extremity was caused by currency overvaluation; the current account deficiency and investor confidence played a significant part in the sharp exchange rate depreciation.

The profitable extremity was primarily due to the large and growing fiscal imbalances over the 1980s. During the mid-eighties, India started having balance of payments problems. Rained by the Gulf War, India’s canvas import bill swelled, exports drooped, credit dried up, and investors took their plutocrats out. Large financial poverties, over time, had a spill over effect on the trade deficiency climaxing in an external payments’ extremity. By the end of the 1980s, India was in serious profitable trouble.

The gross financial deficiency of the government rose from9.0 per cent of Gross Domestic Product (GDP) in 1980-81 to10.4 per cent in 1985-86 and to12.7 per cent in 1990-91. For the centre alone, the gross financial deficiency rose from 6.1 percent of GDP in 1980-81 to8.3 per cent in 1985-86 and to8.4 per cent in 1990-91. Since these poverty levels had to be met by borrowings, the internal debt of the government accumulated fleetly, rising from 35 percent of GDP at the end of 1980-81 to 53 per cent of GDP at the end of 1990-91. The foreign exchange reserves had dried up to the point that India could slightly finance three weeks’ worth of significance.

In mid-1991, India’s exchange rate was subordinated to a severe adaptation. This event began with a slide in the value of the Indian rupee leading up to mid-1991. The authorities at the Reserve Bank of India took partial action, defending the currency by expanding transnational reserves and decelerating the decline in value. Still, in mid-1991, with foreign reserves nearly depleted, the Indian government permitted a sharp devaluation that took place in two ways within three days against major currencies.

The program of profitable policy reform which was put in place in 1990 has yielded amazing results, dramatically perfecting the quality of life in India. Trade liberalisation in India has also corresponded with a dramatic rise in inequality and associated social issues.

The Indian GDP rose from$ 266 billion in 1991 to$ 3 trillion in 2019 while its purchasing power equality rose from$ 1 trillion in 1991 to$ 12 trillion in 2019

1. What was the amount that India borrowed in the 1980s from the IMF, International Monetary Fund?

1. 1. 7 billion
   2. 10 billion
   3. 12 billion
   4. 5 billion

Answer: A

2. At the peak of 1990 India had foreign reserves for how many weeks of import?

1. 1. 3 weeks
   2. 1 week
   3. 2 weeks
   4. 4 weeks

Answer: A

3. Who was India’s prime minister during 1990 when the economic crisis was unfolding?

1. 1. Narendra Modi
   2. Manmohan Singh
   3. Atal Bihari Vajpayee
   4. Chandra Shekhar

Answer: D

4. What is called the twin deficits of 1990?

1. 1. Gold reserves and foreign exchanges
   2. Imports and exports
   3. Devaluation of rupee and inflation
   4. Deficit in trade balance and fiscal deficit

Answer: D

5. What did the Indian government do to get a loan from the IMF?

1. 1. Gave government bonds as collateral
   2. Gave India’s gold reserves as collateral
   3. Made business deals with other countries
   4. Followed protectionism of the domestic market

Answer: B

6. What led the way to liberalization in India?

1. 1. Fall of the Soviet Union
   2. The economic crisis and deficits
   3. The war between India and Pakistan
   4. Gulf War

Answer: B

7. What were the main causes of the depreciation of the Indian currency in 1990?

1. 1. Privatisation of the Indian market
   2. India’s foreign policy relations with the Soviet Union
   3. Deficits, the overvaluation of the rupee and investor confidence
   4. Starting of the Gulf war in the middle east

Answer: C

8. What was India’s gross fiscal deceit in 1990?

1. 1. 15% of Indian GDP
   2. 18% of Indian GDP
   3. 12.7% of Indian GDP
   4. 10.4% of Indian GDP

Answer: C

9. How did the Reserve Bank of India handle the depreciation of the Indian currency during the 1990-1991 period?

1. 1. Sold India’s gold reserves
   2. Introduced Market reforms
   3. Invented foreign countries for investments
   4. Expanded international reserves and slowed the decline in value

Answer: D

10. What was India’s foreign exchange reserve value in January 1991?

1. 1. 7 billion dollars
   2. 6 billion dollars
   3. 3 billion dollars
   4. 1.2 billion dollars

Answer: D

11. Under whose prime minister’s ship did the government bring about liberalisation in Indian media?

1. 1. Chandra Shekar
   2. Manmohan Singh
   3. C.P.V Narsimha Rao
   4. Atal Bihari Vajpayee

Answer: C

12. To which two banks did India airlift gold as collateral for a loan?

1. 1. Bank of England and Union Bank of Switzerland
   2. Union bank of Switzerland and Asian Development Bank
   3. Asian Development Bank and Bank of England
   4. Citi Bank and Royal Bank of Scotland

Answer: A

13. Who was India’s Finance minister during Economic reforms of 1991?

1. 1. Manmohan Singh
   2. Arun Jaitley
   3. P.Chidambaram
   4. Nirmala Sithraman

Answer: A

14. Structural reforms and stabilization measures come under which policy branch?

1. 1. Industrial policy
   2. Monetary regulations
   3. New Economic policy
   4. Financial Policy

Answer: C

15. Which organization is responsible for regulating the financial sector in India?

1. 1. A.RBI
   2. B.NSE
   3. C.SBE
   4. Ministry of Finance

Answer: A

16. After the finance sector reforms there was a limit on foreign financial investment. What was the percentage of the limit?

1. 1. 80%
   2. 70%
   3. 50%
   4. 74%

Answer: D

17. Which of the following organizations is a Navratna?

1. 1. National Aluminium Company [NALCO]
   2. BSNL
   3. Air India
   4. Indian Oil Corporation

Answer: A

18. What is the policy that works on integrating the the country’s economy and global economy

1. 1. Liberalisation
   2. Privatisation
   3. Globalisation
   4. Protectionism

Answer: C

19. What is the name of the organisation that is the predecessor of the World Trade Organization?

1. 1. International Monetary Fund
   2. World Bank
   3. General Agreement on Trade and Tariff
   4. United Nations

Answer: C

20. What is another name for the World Bank?

1. 1. Asian Development Bank
   2. International Bank of Reconstruction and Development
   3. Swiss Bank of Development
   4. Union Development Bank

Answer: B

21. When were Economic reforms introduced in India?

1. 1. 1985
   2. 1995
   3. 1990
   4. 1991

Answer: D

22. What was the issue that was being addressed through the Economic reforms of 1991?

1. 1. Depreciation of the Indian rupee
   2. Crisis in Foreign exchange
   3. Economic policy failure
   4. All of these

Answer: B

23. Who initiated the New Economic Policy in 1991?

1. 1. Prime Minster
   2. Education Minister
   3. Finance Minister
   4. Foreign Minister

Answer: C

24. What was the objective of the New Economic Policy 1991?

1. 1. Structural transformation
   2. Reorganizing Public Administration
   3. Economic reforms
   4. Management of Foreign trade

Answer: C

25. Which was one of the acts that got quashed after the introduction of NEP in 1991?

1. 1. FCRA
   2. MRTP
   3. POSH
   4. MDVP

Answer: B

26. What is the name of the book written by M V Visvesvaraya on the economy of India?

1. 1. Indian Economy: challenges and success
   2. Planned Economy for India
   3. India’s Economic Challenges
   4. Economic reconstruction

Answer: B

27. Who is referred to as the father of India ‘s economic reforms?

1. 1. A.P.V Narasimha Rao
   2. Manmohan Singh
   3. Chandra Shekar
   4. Narendra Modi

Answer: A

28. What were the main reforms introduced by P.V Narasimha Rao?

1. 1. Liberalisation, Globalization and Privatisation
   2. Structural reforms
   3. Economic reconstruction
   4. Foreign policy improvements

Answer: A

29. When a country’s economy becomes globalized, which of the following things happen?

1. 1. Liberalisation
   2. Trade policies
   3. Out sourcing
   4. None of these

Answer: C

30. Of the following sectors which remained a public sector even after the reforms of 1991?

1. 1. Communication
   2. Banking
   3. Construction
   4. Railways

Answer: D