Question

In the late 1980s. government expenditure began to exceed its revenue by such large margins that meeting the expenditure through borrowings became unsustainable. Prices of many essential goods rose sharply. Imports grew at a very high rate without matching growth of exports. Foreign exchange reserves declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that need to be paid to international lenders. Also no country or international fundcr was willing to lend to India. For availing the loan, World Bank and IMF expected India to liberalise and open up the economy by removing restrictions on the private sector. Reduce the role of the government in many areas and remove trade restrictions between India and other countries.
India agreed to the conditionalities of World Bank and IMF and announced the New Economic Policy (NEP). The NEP consisted of wide ranging economic reforms. The thrust of the policies was towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. This set of policies can broadly be classified into two groups: the stabilisation measures and the structural reform measures. (a) Why India needed loan from IMF and World Bank? (b) Infer the importance of the new economic reforms policies. (c) What happened when India's expenditure exceeded its revenue?

Answer 1

Answer:

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Explanation:

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