Question

“The Government of India was compelled to introduce the economic reforms of 1991.”

State any two reasons behind the introduction of Economic Reforms of 1991.

Answer 1

Two reasons behind the introduction of the Economic Reforms of 1991 were:

1. Severe Balance of Payments Crisis: India has a severe foreign exchange shortage and was unable to pay for imports or service its external debt.
2. High Fiscal Deficit and Inflation: The government’s expenditure considerably exceeded its revenue, resulting in a large fiscal deficit and rapid inflation, weakening the economy and investor confidence.