Economic Liberalisation Of India And India

1605 Words Aug 4th, 2014 7 Pages
Economic liberalisation in India
India is a country which was and still is diverse in terms of cultures, languages, ethics and beliefs. During the 1970-1990 when the British rule had just been over in India, it soon started to face problems in their balance of payments. By the end of 1990, it was in a serious economic crisis. The government was close to bankruptcy, the central bank of India had refused new credit and foreign exchange reserves had been depleted to a point where India could barely finance three weeks’ worth of imports which made the Indian government airlift the nations gold reserves as a pledge to the International Monetary Fund (IMF) in exchange for a loan to cover its balance of payment debts.
The main causes of the crisis was 1) currency overvaluation,2) the current account deficit, and the confidence of investors played a significant role in the sharp exchange rate depreciation/devaluation. The economic crisis was primarily due to the large and growing fiscal imbalances over 1980-1985... During 1985-1886, India started to have balance of payments problems. Precipitated by the Gulf War, India’s oil import bill increased, exports decreased, credit dried up, and investors that had invested their money in India took their money out. Large fiscal deficits, over the time, had a huge spill over effect on the trade deficit, culminating in an external payments crisis. By the end of the 90’s, India was in deep economic trouble. The gross fiscal deficit of the…

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