Question : What was the primary reason for the balance of payments crisis in India before liberalization?
Option 1: Low domestic savings
Option 2: High foreign exchange reserves
Option 3: Declining population growth
Option 4: Excessive government spending
Correct Answer: Excessive government spending
Solution : The correct answer is (d) Excessive government spending
Before the liberalization era, India faced a balance of payments crisis primarily due to excessive government spending. The government's extensive control over the economy, coupled with a focus on import substitution industrialization, led to a situation where the country's expenditures exceeded its earnings from exports and other sources.
The government implemented policies that favored import substitution, heavily regulated foreign trade, and imposed high tariffs and trade barriers. This resulted in limited export earnings and a reliance on imports, leading to a growing current account deficit.
The balance of payments crisis highlighted the need for economic reforms, which ultimately led to the initiation of liberalization policies in India in the early 1990s. The liberalization measures aimed to address the root causes of the crisis, including excessive government spending, by opening up the economy, promoting exports, attracting foreign investments, and adopting market-oriented policies.
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Question : What was a major economic challenge faced by India during the suspension of the Five-year Plans?
Option 1: Hyperinflation
Option 2: Balance of payments crisis
Option 3: Excessive foreign debt
Option 4: Decline in industrial output
Question : The Foreign Exchange Regulation Act was replaced by the ______ in India.
Option 1: Foreign Exchange Currency Act
Option 2: Foreign Exchange Finances Act
Option 3: Foreign Exchange Funds Act
Option 4: Foreign Exchange Management Act
Question : The 1991 economic policy in India aimed to address:
Option 1: Increasing government control in the economy
Option 2: High inflation and fiscal deficit
Option 3: Excessive privatization of public enterprises
Option 4: Declining foreign direct investment (FDI)
Question : The annual growth rate percentage of the population in India gradually started declining in the year ______.
Option 1: 1991
Option 2: 1981
Option 3: 1971
Option 4: 1951
Question : The main factor for the accelerated growth of population in India is
Option 1: low birth rate and low death rate
Option 2: a high birth rate and a falling death rate
Option 3: a rising birth rate and a rising death rate
Option 4: a high birth rate and high death rate
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