Question: Government wanted foreign exchange equivalent to Indian Currency.
The correct answer is –
The answer to this question is that the Indian government wanted foreign exchange equivalent to Indian Currency to address the balance of payments crisis and stabilize the value of the Indian Rupee.
In the early 1990s, India was facing a severe balance of payments crisis due to a large and growing current account deficit. The government needed to increase its foreign exchange reserves to pay for imports and service its external debt obligations. One way to do this was to encourage foreign investment and exports, which would bring in foreign exchange.
To achieve this, the government introduced a series of economic reforms in 1991, which included liberalizing trade and investment policies, reducing import tariffs, and devaluing the Indian Rupee. These measures were aimed at making Indian exports more competitive and attractive to foreign buyers, and at encouraging foreign investors to bring in their capital to invest in India.
By increasing its foreign exchange reserves, the government was able to stabilize the value of the Indian Rupee and avoid a currency crisis. This was important for maintaining investor confidence in the Indian economy and attracting further foreign investment. Overall, the government’s efforts to boost foreign exchange reserves were a key part of its strategy to address the balance of payments crisis and lay the foundation for India’s rapid economic growth in the years that followed.
