10 Questions
What triggered India's economic crisis in 1991?
A balance-of-payments problem
What policy did India abandon in order to integrate into the world economy?
Import substitution policy
How much did tariff rates on imports decrease from 1990 to 2009 in India?
80%
What did India move to in terms of its exchange rate system?
Market-determined exchange rate system
How has India's external sector regime been described?
Beneficial and resilient
Does India currently have a current account deficit?
Yes, but it is low
Has India's CAD consistently decreased since 1991-92?
No, it has fluctuated
What type of investments dominated the financing of India's CAD in 2014-15?
Foreign direct investment and portfolio investment
How were India's foreign exchange reserves built?
Through excess capital flows
Why is it important for India to keep the CAD at a level that can be financed by normal capital flows?
To avoid a balance-of-payments problem
Study Notes
- In 1991, India faced an economic crisis triggered by a balance-of-payments problem.
- India abandoned the import substitution policy and began integrating into the world economy.
- Tariff rates on imports decreased from 76.3% in 1990 to 8.3% in 2009.
- India moved to a market-determined exchange rate system and allowed foreign direct investment.
- India's external sector regime has been beneficial and resilient.
- India still has a current account deficit, but it is low due to surplus in services.
- CAD has come down since 1991-92, except in 2011-12 and 2012-13.
- Financing of CAD has changed, with FDI and portfolio investment dominating in 2014-15.
- Foreign exchange reserves stand at $420 billion, built out of excess capital flows rather than current account surpluses.
- It is imperative to keep the CAD at a level that can be financed by normal capital flows.
Test your knowledge on India's economic reforms after the 1991 crisis with this informative quiz. Explore the country's integration into the world economy, changes in tariff rates, and the shift to a market-determined exchange rate system. Learn about India's current account deficit, financing options, and the importance of maintaining a sustainable CAD level. This quiz will provide valuable insights into India's external sector regime and its resilience in the face of economic challenges.
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