CSEET · Economic and Business Environment · Indian Economy
Which measure formed part of the 1991 reforms in the external sector?
The 1991 external sector reforms included devaluing the rupee and moving towards a market-determined exchange rate, along with lower tariffs and openness to foreign investment. Banning FDI, pegging the rupee permanently or raising tariffs would go against the globalisation thrust of the reforms.
- ADevaluation of the rupee and a move towards market-determined exchange rateCorrect
- BComplete ban on foreign direct investment in manufacturing
- CFixing the rupee permanently to the US dollar
- DRaising import tariffs to very high peak levels
Explanation
In July 1991 the rupee was devalued to address the balance of payments crisis, and India then moved towards a market-determined exchange rate. Reforms also lowered tariffs and welcomed FDI, so the other options contradict the reform direction.
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