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    Question

    During 1991 BoP Crisis India’s external debt was ____

    per cent and internal debt was _____ per cent. A. Crops B. Livestock C. Fishing D. Forestry and Logging
    A 23 percent and 55 percent respectively Correct Answer Incorrect Answer
    B 55 percent and 23 percent respectively Correct Answer Incorrect Answer
    C 43 percent and 65 percent respectively Correct Answer Incorrect Answer
    D 65 percent and 43 percent respectively Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    The serious external payments crisis that struck in 1991 could be attributed mainly to the highly expansionary fiscal policy pursued since the mid-1980s that caused some serious distortions in macroeconomic management of both the domestic and external sectors. This was exacerbated by certain coincidental geopolitical developments. The early reform measures introduced from the mid-1980s were implemented without an overarching framework, resulting in the emergence of macroeconomic distortions. The fiscal deficit as a percentage of GDP enlarged to 9.4 per cent in 1990–91 as against the average of 6.3 per cent in the first half of the 1980s.

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