explain any two reasons for need of economic reform
Answers
Answer:
(ii) Rise in Fiscal Deficit:
Fiscal deficit means difference between total expenditure and total receipts minus loans. To cover the fiscal deficit, the Govt. has to raise loans and pay interest on it. Due to rise in fiscal deficit there was rise in public debt and interest. ... So Govt. has to resort to economic reforms.
Explanation:
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Answer:
(i) Rise in Prices:
Price rise continuously in India. The inflation rate increased from 6.7% to 16.7%.
Due to inflation country’s economic position became worse
(ii) Rise in Fiscal Deficit:
Due to increase in non- development expenditure fiscal deficit of the Govt. had been increasing. Fiscal deficit means difference between total expenditure and total receipts minus loans. To cover the fiscal deficit, the Govt. has to raise loans and pay interest on it. Due to rise in fiscal deficit there was rise in public debt and interest. In 1991 interest liability became 36.4% of total govt. expenditure. The Govt. caught in debt trap. So Govt. has to resort to economic reforms.