Question

The most urgent problem which prompted the introduction of new economic policy in 1991 was​

Answer 1

Explanation:

The government announced a New Industrial Policy on 24 July 1991. The New Industrial Policy established in 1991 sought substantially to deregulate industry so as to promote growth of a more efficient and competitive industrial economy.

Answer 2

The most urgent problem which prompted the introduction of new economic policy in 1991 was​ BOP (Balance of payment) crisis.

1. In 1980's the economy was not efficiently managed.
2. The social welfare policies increased to manage the increase in population, mass poverty and inefficient use of resources. This increased the government's expenditure.
3. There was a simultaneous increase in the imports against the exports of the country.
4. The tax generation and internal borrowings were no longer sufficient to fund the government expenditure. This led to increased foreign borrowings.
5. The expenditure increased so much that in 1990s foreign exchange reserve of only two weeks was left to fund imports of the country.
6. India then took monetary help of 7 billion dollars from World Bank and IMF in exchange of a promise to liberalize the economy.