Question -
Answer -
Reforms were introduced in the year 1991 due to the following reasons:
1. To manage the economic crisis that the country was going through
2. Fiscal deficit was going through the worst phase during that period and that resulted in increased public debt.
3. India was going through a weak Balance of Payments (BOP) scenario. With the fall of erstwhile Soviet Union and the Gulf War, it led to borrowing from International market. Finally, this led to the formation of new economic policy to attain a balanced economy.
4. PSU’s were established with the aim of providing employment and remove poverty. But the PSU’s turned out to be loss making units, which burdened the already weak economy of the country.
5. High level of fiscal deficit lead to RBI increasing the inflation rate, which made goods more costly and led to the starting of a movement from within.