Question

How were the large fiscal deficits of the 1980s financed in India?

विकल्प

• Through sale of foreign exchange reserves

• Through grants from the World Trade Organisation

• Through heavy external borrowings

• Through surplus export earnings

Answer 1

Since government expenditure consistently exceeded revenue, the resulting fiscal deficit was financed through heavy external borrowings. This mounting external debt became a major contributor to the eventual BoP crisis.