What was the primary reason for the "Crisis of Confidence" in 1991 that triggered the New Economic Policy?

CA Foundation · Business Economics · RTP · May 2026
What was the primary reason for the "Crisis of Confidence" in 1991 that triggered the New Economic Policy?
(A) A. Failure of the monsoon for three consecutive years.
(B) B. Foreign exchange reserves falling to $1.2 billion, sufficient for only two weeks of imports.
(C) C. A total collapse of the banking sector due to high NPAs.
(D) D. The sudden withdrawal of all US food aid under PL 480.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. Foreign exchange reserves falling to $1.2 billion, sufficient for only two weeks of imports.

Topics: Indian Economy

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