Q.1:- Why were reforms introduced in India?
In 1991, economic reforms were introduced in India because 1991 was the year of crisis for the Indian economy. It is clear from the following facts:
(a) National income was growing at the rate of 0.8%.
(b) Inflation reached the height of 16.8%.
(c) Balance of payment crisis was to the extent of 10,000 crores.
(a) India was highly indebted country. It was paying 30,000 crores interest charges per year.
(e) Foreign exchanges reserves were only 1.8 billion dollars which were sufficient for three weeks.
(f) India sold large amount of gold to Bank of England.
(g) India applied for the loan from World Bank and IMF to the extent of 7 billion dollars.
(h) Fiscal deficit was more than 7.5%.
(i) Deficit financing was around 3%.
(j) Trade relation with Soviet block had broken down.
(k) Remmittances from non-residence Indians stopped due to war in Arab countries.
(l) Price of petroleum products was very high.