Quick Links
Quick Links
UPSC Exams
Latest Update
UPSC Mains Exam Schedule 2025 Bihar Sakshamta Pariksha Admit Card 2025 UP LT Grade Teacher Notification 2025 in Hindi UP LT Grade Teacher 2025 Notification UPSC CMS Admit Card 2025 Out HTET New Exam Date 2025 OTET Admit Card 2025 RRB Railway Teacher Application Status 2025 CSIR NET Exam Date 2025 UPSC DAF 1 2025 UPSC Prelims Result 2025 UPSC IFS Result 2025 8th Pay Commission Salary Hike News UPSC 2024 Prelims Answer Key UPSC 2026 Calendar UPSC Admit Card 2025 UPSC Prelims Result Date 2025 UPSC Prelims Answer Key 2025 UPSC Prelims 2025 Expected Cut Off UPSC Prelims Exam Analysis 2025 UPSC Final Result 2025 UPSC Topper Shakti Dubey UPSC Application Rejected List 2025 UPSC Application Date Re-Extended UPSC Notification 2025 UPSC Admit Card 2025 for Prelims UPSC CSE Prelims 2025 Question Paper UPSC IFS Notification 2025
Coaching
UPSC Current Affairs
Syllabus
UPSC Notes
Previous Year Papers
UPSC Mains Previous Year Question Papers Last 25 Years UPSC Prelims Question Papers Last 10 Years UPSC Question Papers UPSC CSE Prelims 2025 Question Paper UPSC Mains 2024 Model Answers UPSC 2024 Question Papers UPSC 2023 Question Papers UPSC 2022 Question Papers UPSC 2021 Question Papers UPSC 2020 Question Papers UPSC 2019 Question Papers UPSC 2018 Question Papers UPSC 2017 Question Papers UPSC 2016 Question Papers UPSC 2015 Question Papers UPSC 2014 Question Papers UPSC CSAT Question Papers UPSC IFS Previous Year Paper UPSC Assistant Labour Commissioner Previous Question Year Papers UPSC Combined Geo Scientist Previous Year Paper UPSC APFC Previous Year Question Papers UPSC CMS Previous Year Question Paper UPSC EPFO Previous Year Paper UPSC Air Safety Officer Previous Year Papers UPSC SO Steno Previous Year Paper UPSC IES ISS Previous Year Question Papers
Mock Tests
UPSC Editorial
Bilateral Ties
Albania India Relations India Algeria Relations Andorra India Relations India Angola Relations India Antigua Barbuda Relations India Argentina Relations Austria India Relations India Azerbaijan Relations Bahamas India Relations India Bahrain Relations Barbados India Relations India Belarus Relations Belgium India Relations Belize India Relations Benin India Relations Bolivia India Relations India Bosnia Herzegovina Relations India Botswana Relations Brazil India Relations Brunei India Relations Bulgaria India Relations Burundi India Relations Cabo Verde India Relations India Cambodia Relations India Cameroon Relations Canada India Relations India Cayman Islands Relations India Central African Republic Relations India Chad Relations Chile India Relations India Colombia Relations India Comoros Relations India Democratic Republic Of The Congo Relations India Republic Of The Congo Relations India Cook Islands Relations India Costa Rica Relations India Ivory Coast Relations India Croatia Relations India Cyprus Relations India Czech Republic Relations India Djibouti Relations India Dominica Relations India Dominican Republic Relations India Ecuador Relations India El Salvador Relations India Equatorial Guinea Relations India Eritrea Relations Estonia India Relations India Ethiopia Relations India Fiji Relations India Finland Relations India Gabon Relations India Gambia Relations India Georgia Relations Germany India Relations India Ghana Relations India Greece Relations India Grenada Relations India Guatemala Relations India Guinea Relations India Guinea Bissau Relations India Guyana Relations India Haiti Relations India Holy See Relations India Honduras Relations India Hong Kong Relations India Hungary Relations India Iceland Relations India Indonesia Relations India Iran Relations India Iraq Relations India Ireland Relations India Jamaica Relations India Kazakhstan Relations India Kenya Relations India Kingdom Of Eswatini Relations India Kiribati Relations India Kuwait Relations India Kyrgyzstan Relations India Laos Relations Latvia India Relations India Lebanon Relations India Lesotho Relations India Liberia Relations Libya India Relations Liechtenstein India Relations India Lithuania Relations India Luxembourg Relations India Macao Relations Madagascar India Relations India Malawi Relations India Mali Relations India Malta Relations India Marshall Islands Relations India Mauritania Relations India Micronesia Relations India Moldova Relations Monaco India Relations India Montenegro Relations India Montserrat Relations India Morocco Relations Mozambique India Relations India Namibia Relations India Nauru Relations Netherlands India Relations India Nicaragua Relations India Niger Relations India Nigeria Relations India Niue Relations India North Macedonia Relations Norway India Relations India Palau Relations India Panama Relations India Papua New Guinea Relations India Paraguay Relations Peru India Relations India Philippines Relations Qatar India Relations India Romania Relations Rwanda India Relations India Saint Kitts And Nevis Relations India Saint Lucia Relations India Saint Vincent And Grenadines Relations India Samoa Relations India Sao Tome And Principe Relations Saudi Arabia India Relations India Senegal Relations Serbia India Relations India Sierra Leone Relations India Singapore Relations India Slovak Republic Relations India Slovenia Relations India Solomon Islands Relations Somalia India Relations India South Sudan Relations India Spain Relations India Sudan Relations Suriname India Relations India Sweden Relations India Syria Relations India Tajikistan Relations Tanzania India Relations India Togo Relations India Tonga Islands Relations India Trinidad And Tobago Relations India Tunisia Relations India Turkmenistan Relations India Turks And Caicos Islands Relations India Tuvalu Relations India Uganda Relations India Ukraine Relations India Uae Relations India Uruguay Relations India Uzbekistan Relations India Vanuatu Relations India Venezuela Relations India British Virgin Islands Relations Yemen India Relations India Zambia Relations India Zimbabwe Relations
Books
Government Schemes
Production Linked Incentive Scheme Integrated Processing Development Scheme Rodtep Scheme Amended Technology Upgradation Fund Scheme Saathi Scheme Uday Scheme Hriday Scheme Samagra Shiksha Scheme India Nishta Scheme Stand Up India Scheme Sahakar Mitra Scheme Mdms Mid Day Meal Scheme Integrated Child Protection Scheme Vatsalya Scheme Operation Green Scheme Nai Roshni Scheme Nutrient Based Subsidy Scheme Kalia Scheme Ayushman Sahakar Scheme Nirvik Scheme Fame India Scheme Kusum Scheme Pm Svanidhi Scheme Pmvvy Scheme Pm Aasha Scheme Pradhan Mantri Mahila Shakti Kendra Scheme Pradhan Mantri Lpg Panjayat Scheme Mplads Scheme Svamitva Scheme Pat Scheme Udan Scheme Ek Bharat Shresth Bharat Scheme National Pension Scheme Ujala Scheme Operation Greens Scheme Gold Monetisation Scheme Family Planning Insurance Scheme Target Olympic Podium Scheme
Topics
NASA Space Missions
NASA Mercury-Redstone 3 (Freedom 7) Mission NASA Mercury-Redstone 4 (Liberty Bell 7) Mission NASA Mercury-Atlas 6 (Friendship 7) Mission NASA Mercury-Atlas 7 (Aurora 7) Mission NASA Mercury-Atlas 8 (Sigma 7) Mission NASA Mercury-Atlas 9 (Faith 7) Mission NASA Gemini 3 Mission NASA Gemini 4 Mission NASA Gemini 5 Mission NASA Gemini 7 Mission NASA Gemini 8 Mission NASA Gemini 9 Mission NASA Gemini 10 Mission NASA Gemini 11 Mission NASA Gemini 12 Mission NASA Apollo 1 (AS‑204) Mission NASA Apollo 7 Mission NASA Apollo 8 Mission NASA Apollo 9 Mission NASA Apollo 10 Mission NASA Apollo 11 Mission NASA Apollo 12 Mission NASA Apollo 13 Mission NASA Apollo 14 Mission NASA Apollo 15 Mission NASA Apollo 16 Mission NASA Apollo 17 Mission NASA Skylab Orbital Workshop Mission NASA Skylab 2 Mission NASA Skylab 3 Mission NASA Skylab 4 Mission NASA Apollo–Soyuz Test Project Mission NASA STS‑1 Columbia Mission NASA STS‑3 Columbia Mission NASA STS‑7 Challenger Mission NASA STS‑8 Challenger Mission NASA STS‑41B Challenger Mission NASA STS‑41G Discovery (1st female EVA) Mission NASA STS‑51L Challenger (accident) Mission NASA STS‑26 Discovery (Return‑to‑Flight) Mission NASA STS‑31 Discovery (Hubble Launch) Mission NASA STS‑49 Endeavour (first capture EVA) Mission NASA STS‑61 Endeavour (Hubble Servicing 1) Mission NASA STS‑73 Columbia (microgravity) Mission NASA STS‑95 Discovery (John Glenn returns) Mission NASA STS‑107 Columbia (accident) Mission NASA STS‑114 Discovery (RTF‑2) Mission NASA STS‑120 Discovery (Node 2) Mission NASA STS‑125 Atlantis (Final Hubble Service) Mission NASA STS‑132 Atlantis Mission NASA STS‑135 Atlantis (Final Shuttle flight) Mission NASA Artemis I (Orion/ SLS‑1) Mission NASA Artemis II (Planned) Mission NASA Artemis III (Planned lunar landing) Mission NASA Mariner 4 Mission NASA Mariner 6 Mission NASA Mariner 7 Mission NASA Mariner 9 Mission NASA Viking 1 Orbiter/Lander Mission NASA Viking 2 Orbiter/Lander Mission NASA Mars Pathfinder & Sojourner Mission NASA Mars Global Surveyor Mission NASA 2001 Mars Odyssey Mission NASA Mars Exploration Rover – Spirit Mission NASA Mars Exploration Rover – Opportunity Mission NASA Mars Reconnaissance Orbiter Mission NASA Phoenix Mars Lander Mission NASA InSight Mars Lander Mission NASA Mars 2020 (Perseverance & Ingenuity) Mission NASA Mars Sample Return – SRL (planned) Mission NASA Pioneer 10 Mission NASA Pioneer 11 Mission NASA Voyager 1 Mission NASA Voyager 2 Mission NASA Galileo Jupiter Orbiter/Probe Mission NASA Cassini–Huygens Mission NASA New Horizons (Pluto & KBO) Mission NASA Juno Mission NASA Europa Clipper (planned) Mission NASA Parker Solar Probe Mission NASA Solar Orbiter (ESA/NASA) Mission NASA Surveyor 1 Mission NASA Lunar Orbiter 1 Mission NASA Lunar Prospector Mission NASA LCROSS Mission NASA LADEE Mission NASA Lunar Reconnaissance Orbiter (LRO) Mission NASA CAPSTONE Mission NASA VIPER Rover (planned) Mission NASA NEAR Shoemaker Mission NASA Deep Space 1 Mission NASA Stardust Mission NASA Genesis Mission NASA Deep Impact Mission NASA Dawn (Vesta/Ceres) Mission NASA OSIRIS‑REx Mission NASA Lucy Mission NASA DART Mission NASA Landsat‑1 (ERTS‑1) Mission NASA Landsat‑5 Mission NASA Landsat‑9 Mission NASA Terra Mission NASA Aqua Mission NASA Aura Mission NASA Suomi NPP Mission NASA Sentinel‑6 Michael Freilich Mission NASA ICESat‑2 Mission NASA GRACE‑FO Mission NASA SMAP Mission NASA GPM Core Observatory Mission NASA CALIPSO Mission NASA CloudSat Mission NASA NISAR (NASA‑ISRO) Mission NASA Explorer 1 Mission NASA COBE Mission NASA Compton Gamma Ray Observatory Mission NASA Hubble Space Telescope Mission NASA Chandra X‑ray Observatory Mission NASA Spitzer Space Telescope Mission NASA WISE Mission NASA Kepler Mission NASA TESS Mission NASA Fermi Gamma‑ray Space Telescope Mission NASA NICER Mission NASA IXPE Mission NASA Roman Space Telescope (planned) Mission NASA NuSTAR Mission NASA GALEX Mission NASA Swift Mission NASA SOHO (ESA/NASA) Mission NASA Cluster II (ESA/NASA) Mission NASA TIMED Mission NASA STEREO‑A/B Mission NASA MMS Mission NASA IRIS Mission NASA Solar Dynamics Observatory Mission NASA X‑37B OTV‑1 (USAF/NASA liaison) Mission NASA X‑59 QueSST Mission NASA Mars Helicopter Ingenuity Mission NASA Valkyrie R5 Robot Mission NASA Low‑Boom Flight Demo Mission NASA CRS‑1 Dragon Mission NASA CRS‑1 Cygnus Mission NASA Crew Dragon Demo‑2 Mission NASA Starliner OFT‑2 Mission NASA STS-2 (Shuttle flight) Mission NASA STS-4 (Shuttle flight) Mission NASA STS-5 (Shuttle flight) Mission NASA STS-6 (Shuttle flight) Mission NASA STS-41C (Shuttle flight) Mission NASA STS-41D (Shuttle flight) Mission NASA STS-51A (Shuttle flight) Mission NASA STS-61C (Shuttle flight) Mission NASA STS-26 (Shuttle flight) Mission NASA STS-27 (Shuttle flight) Mission NASA STS-29 (Shuttle flight) Mission NASA STS-30 (Shuttle flight) Mission NASA STS-32 (Shuttle flight) Mission NASA STS-34 (Shuttle flight) Mission NASA STS-38 (Shuttle flight) Mission NASA STS-45 (Shuttle flight) Mission NASA STS-60 (Shuttle flight) Mission NASA STS-70 (Shuttle flight) Mission NASA STS-71 (Shuttle flight) Mission NASA STS-73 (Shuttle flight) Mission NASA STS-88 (Shuttle flight) Mission NASA STS-92 (Shuttle flight) Mission NASA STS-97 (Shuttle flight) Mission NASA STS-99 (Shuttle flight) Mission NASA STS-100 (Shuttle flight) Mission NASA STS-104 (Shuttle flight) Mission NASA STS-106 (Shuttle flight) Mission NASA STS-110 (Shuttle flight) Mission NASA STS-112 (Shuttle flight) Mission NASA STS-115 (Shuttle flight) Mission NASA STS-116 (Shuttle flight) Mission NASA STS-117 (Shuttle flight) Mission NASA STS-118 (Shuttle flight) Mission NASA STS-120 (Shuttle flight) Mission NASA STS-122 (Shuttle flight) Mission NASA STS-123 (Shuttle flight) Mission NASA STS-126 (Shuttle flight) Mission NASA STS-130 (Shuttle flight) Mission NASA Vanguard 1 Mission NASA Transit 1B Mission NASA Echo 1 Mission NASA Telstar 1 Mission NASA Syncom 3 Mission NASA ATS‑6 Mission NASA Skynet Mission NASA Nimbus‑1 Mission NASA Nimbus‑7 Mission NASA ERS-1 Mission NASA SeaSat Mission NASA QuikSCAT Mission NASA Jason‑1 Mission NASA Jason‑3 Mission NASA ICESat Mission NASA Earth Observing‑1 Mission NASA Orbiting Carbon Observatory‑2 Mission NASA CYGNSS Mission NASA PACE Mission NASA TRMM Mission NASA Terrestrial Planet Finder (cxl) Mission NASA Laser Interferometer Space Antenna (LISA) Mission NASA Explorer 33 Mission NASA Voyager Interstellar Mission Mission NASA Helios‑A Mission NASA Helios‑B Mission NASA ISEE‑3 (ICE) Mission NASA ACE Mission NASA DSCOVR Mission NASA IBEX Mission NASA Solar Orbiter Heliospheric Imager Mission NASA SAGE‑III ISS Mission NASA SPACE Telescope Imaging Spectrograph Mission NASA ARIEL (ESA/NASA) Mission NASA OSAM‑1 (Restore‑L) Mission NASA Dragonfly (Titan rotorcraft) Mission NASA VERITAS (Venus orbiter) Mission NASA DAVINCI (Venus probe) Mission NASA SPHEREx Mission NASA MAGGIE (Mars Geophysical) Mission NASA CLPS – Peregrine Mission NASA CLPS – VIPER Delivery Mission NASA CAPSTONE Mission NASA Gateway (HALO / PPE) Mission NASA Mars Telecommunication Orbiter (cxl) Mission NASA Mars Polar Lander (MPL) Mission NASA Mars Climate Orbiter Mission NASA Pathfinder Mission Mission NASA SLS Block 1B (Exploration Upper Stage) Mission NASA Orion Crew Module Mission NASA Commercial LEO Destinations – Axiom Station Mission NASA ISS Expedition 1 Mission NASA ISS Expedition 70 Mission NASA CRS‑11 (Dragon) Mission NASA CRS‑21 (Dragon 2) Mission NASA Snoopy CubeSat Mission
ISRO Space Missions
NVS-02 ISRO Space Mission SPADEX-A ISRO Space Mission SPADEX-B ISRO Space Mission Proba-3 ISRO Space Mission GSAT-N2 ISRO Space Mission EOS-08 ISRO Space Mission INSAT-3DS ISRO Space Mission XPoSat ISRO Space Mission Aditya-L1 ISRO Space Mission Chandrayaan-3 ISRO Space Mission NVS-01 ISRO Space Mission EOS-07 ISRO Space Mission INS-2B ISRO Space Mission EOS-06 ISRO Space Mission EOS-02 ISRO Space Mission GSAT-24 ISRO Space Mission INS-2TD ISRO Space Mission EOS-04 ISRO Space Mission EOS-03 ISRO Space Mission CMS-01 ISRO Space Mission EOS-01 ISRO Space Mission GSAT-30 ISRO Space Mission RISAT-2BR1 ISRO Space Mission Chandrayaan 2 ISRO Space Mission RISAT-2B ISRO Space Mission EMISAT ISRO Space Mission GSAT-31 ISRO Space Mission Microsat-R ISRO Space Mission GSAT-7A ISRO Space Mission GSAT-11 ISRO Space Mission HysIS ISRO Space Mission GSAT-29 ISRO Space Mission IRNSS-1I ISRO Space Mission GSAT-6A ISRO Space Mission INS-1C ISRO Space Mission Microsat ISRO Space Mission IRNSS-1H ISRO Space Mission GSAT-17 ISRO Space Mission GSAT-19 ISRO Space Mission GSAT-9 ISRO Space Mission Cartosat-2 Series Satellite INS-1A ISRO Space Mission INS-1B ISRO Space Mission RESOURCESAT-2A ISRO Space Mission GSAT-18 ISRO Space Mission INSAT-3DR ISRO Space Mission IRNSS-1G ISRO Space Mission IRNSS-1F ISRO Space Mission IRNSS-1E ISRO Space Mission GSAT-15 ISRO Space Mission GSAT-6 ISRO Space Mission IRNSS-1D ISRO Space Mission Crew module Atmospheric Re-entry Experiment (CARE) ISRO Space Mission GSAT-16 ISRO Space Mission IRNSS-1C ISRO Space Mission IRNSS-1B ISRO Space Mission GSAT-14 ISRO Space Mission Mars Orbiter Mission Spacecraft GSAT-7 ISRO Space Mission INSAT-3D ISRO Space Mission IRNSS-1A ISRO Space Mission SARAL ISRO Space Mission GSAT-10 ISRO Space Mission RISAT-1 ISRO Space Mission Megha-Tropiques ISRO Space Mission GSAT-12 ISRO Space Mission GSAT-8 ISRO Space Mission RESOURCESAT-2 ISRO Space Mission YOUTHSAT ISRO Space Mission GSAT-5P ISRO Space Mission GSAT-4 ISRO Space Mission Oceansat-2 ISRO Space Mission RISAT-2 ISRO Space Mission Chandrayaan-1 ISRO Space Mission IMS-1 ISRO Space Mission INSAT-4CR ISRO Space Mission INSAT-4B ISRO Space Mission SRE-1 ISRO Space Mission INSAT-4C ISRO Space Mission INSAT-4A ISRO Space Mission HAMSAT ISRO Space Mission EDUSAT ISRO Space Mission IRS-P6 / RESOURCESAT-1 ISRO Space Mission INSAT-3E ISRO Space Mission GSAT-2 ISRO Space Mission INSAT-3A ISRO Space Mission KALPANA-1 ISRO Space Mission INSAT-3C ISRO Space Mission GSAT-1 ISRO Space Mission INSAT-3B ISRO Space Mission Oceansat(IRS-P4) ISRO Space Mission INSAT-2E ISRO Space Mission IRS-1D ISRO Space Mission INSAT-2D ISRO Space Mission IRS-P3 ISRO Space Mission IRS-1C ISRO Space Mission INSAT-2C ISRO Space Mission IRS-P2 ISRO Space Mission SROSS-C2 ISRO Space Mission IRS-1E ISRO Space Mission INSAT-2B ISRO Space Mission INSAT-2A ISRO Space Mission SROSS-C ISRO Space Mission IRS-1B ISRO Space Mission INSAT-1D ISRO Space Mission INSAT-1C ISRO Space Mission SROSS-2 ISRO Space Mission IRS-1A ISRO Space Mission SROSS-1 ISRO Space Mission INSAT-1B ISRO Space Mission Rohini Satellite RS-D2 ISRO Space Mission INSAT-1A ISRO Space Mission Bhaskara-II ISRO Space Mission Ariane Passenger Payload Experiment (APPLE) ISRO Rohini Satellite RS-D1 ISRO Space Mission Rohini Satellite RS-1 ISRO Space Mission Rohini Technology Payload (RTP) ISRO Space Mission Bhaskara-I ISRO Space Mission Aryabhata ISRO Space Mission
Home / IAS Preparation / Balance Of Payment Crisis 1991

Balance payment crisis, 1991- History, Causes, Effects, Government Measures & Role of Manmohan Singh

Last Updated on Aug 28, 2023
Also Read Balance Of Payment Crisis 1991 in Hindi
Download As PDF
IMPORTANT LINKS
Agriculture Notes For UPSC Public Administration UPSC Notes Modern History Books For UPSC Overseas Citizen Of India Caste System & Panchayati Raj Godavari River Federalism In India Indira Point New Development Bank Battle Of Sinhagad Sankalp And Strive Schemes Digital India High Yielding Varieties Economic Growth Development League Of Nations Ease Of Doing Business Mid Day Meal Scheme Wildlife Protection Act 1972 UPSC Notes International Union Conservation Nature

The Balance of Payment (BoP) crisis in 1991 was a major turning point in the history of India's economy. It was triggered by a combination of factors such as a high fiscal deficit, growing current account deficit, declining foreign reserves, and the Gulf War, which led to a severe shortage of foreign exchange and made it difficult for India to pay for its imports and service its foreign debt. The government approached the International Monetary Fund (IMF) for a bailout package. It took several measures to address the crisis, including devaluing the rupee, implementing fiscal and monetary tightening, and reducing import tariffs. The BoP crisis of 1991 was a wake-up call for India, leading to economic reforms to stabilize the economy and promote growth.

This topic of “balance payment crisis 1991” is important from the perspective of the UPSC IAS Examination, which falls under General Studies Paper 3 (Mains) and General Studies Paper 1 (Preliminary) and particularly in the Environment section of the UPSC Exam. In this article, we shall discuss ‘balance payment crisis 1991’ and Know about Balance payment crisis 1991, Its Cause, Measure taken & More!

Register for UPSC Online Classes at an affordable price through the UPSC CSE Coaching platform to boost your IAS preparation. 

FREEMentorship Program by
Ravi Kapoor, Ex-IRS
UPSC Exam-Hacker, Author, Super Mentor, MA
100+ Success Stories
Key Highlights
Achieve your Goal with our mentorship program, offering regular guidance and effective exam strategies.
Cultivate a focused mindset for exam success through our mentorship program.
2 Lakh+ Students Mentored Get
Get Free Mentorship Now
UPSC Beginners Program

Get UPSC Beginners Program SuperCoaching @ just

₹50000

Claim for free
Want to know more about this pass ?
Explore SuperCoaching

What is the Balance Of Payment Crisis? 

A bop crisis in 1991 happens when a country has problems paying for its imports with its exports and other sources of foreign currency. It means the country is spending more money on foreign goods and services than it's earning from selling its goods and services to other countries. This creates a deficit, or a negative balance, in the country's overall payment transactions with the rest of the world. The crisis can lead to a shortage of foreign currency reserves, making it difficult for the country to meet its international obligations. It may also result in a devaluation of the country's currency, making imports more expensive and reducing the purchasing power of its citizens. Balance of Payment Crisis can negatively affect the economy, such as inflation, unemployment, and reduced economic growth.

Read the linked article for the UPSC Exam to learn more about the: CRR repo rate reserve repo rate.

Causes of Balance Payment Crisis

Several factors can contribute to the labor crisis. Here are some of the key causes:

  • Macroeconomic Imbalances: Large trade deficits, persistent fiscal deficits, and high inflation can lead to a balance of payments crisis.
  • External Shocks: Sudden changes in the global economy, such as a decrease in demand for a country's exports or an increase in the cost of imports, can trigger a balance of payments crisis.
  • Exchange Rate Volatility: Fluctuations in the value of a country's currency can lead to a balance of payments crisis if it results in a sudden increase in the cost of imports or a decrease in the value of exports.
  • Political Instability: Political instability and uncertainty can reduce investor confidence and foreign investment flow, exacerbating a balance of payments crisis.
  • Unsustainable Debt: A country with high levels of external debt may experience a balance of payments crisis if it cannot meet its debt obligations and is forced to rely on foreign currency reserves.
  • Government Spending: Excessive government spending, particularly on imports, can lead to a balance of payments crisis if sufficient foreign earnings do not offset it.
  • Protectionist Policies: Trade restrictions, such as tariffs and quotas, can reduce a country's ability to compete in international markets, leading to a balance of payments crisis.

Study in detail the Ayushman Bharat Scheme for UPSC with this link!

Effects of the Balance of Payment Crisis 1991

 Here are some of the key features of the bop crisis in India in 1991:

  • Large Balance of Payments Deficit: India faced a large and persistent balance of payments deficit, increasing pressure on its foreign currency reserves.
  • Depletion of Foreign Currency Reserves: The country's foreign currency reserves were rapidly depleting, putting the value of the rupee under threat and exacerbating the crisis.
  • Devaluation of the Rupee: In response to the crisis, the Indian government was forced to devalue the rupee, making imports more expensive and exports cheaper, to restore balance to the balance of payments.
  • Implementation of Economic Reforms: The government implemented a series of economic reforms aimed at liberalizing the economy and reducing government intervention, including reducing trade restrictions, deregulating industry, and promoting competition.
  • Increased Foreign Investment: The reforms attracted increased foreign investment and helped to revive the Indian economy, which has since grown at a rapid pace.
  • Macroeconomic Imbalances: The crisis resulted from macroeconomic imbalances, including high inflation, a large fiscal deficit, and persistent trade restrictions.
  • Lessons Learned: The crisis served as a wake-up call for policymakers, highlighting the importance of sound economic management and the need for reforms that promote greater efficiency, competitiveness, and growth.

Read the linked article for the UPSC Exam Fiscal Consolidation.

Measures Taken by the Government

To address the balance of payments crisis in India in 1991, the government took several measures to restore stability to the economy. Here are some of the key measures:

  • Rupee Devaluation: India's government decreased the value of the rupee, boosting exports but making imports costlier to enhance the trade balance and reduce the payment deficit.
  • Economic Reform Implementation: The government executed reforms to liberalize, increase efficiency, and promote competition, which included easing trade barriers, deregulating industries, and welcoming foreign investment.
  • Government Spending Cut: The fiscal deficit was curbed by reducing government spending and introducing revenue-enhancing measures.
  • International Institution Borrowing: The government sought financial aid from entities like IMF to stabilize the economy and payments.
  • Foreign Investment Promotion: To address the payment deficit, steps were taken to attract foreign investment, like tax incentives and reduced bureaucracy.
  • Capital Market Development: The government encouraged foreign investment in the stock market to boost funding availability.
  • Macroeconomic Indicator Monitoring: Monitoring indicators such as inflation and fiscal deficit was improved to anticipate and address imbalances.
  • Monetary Measures: In 1991, the rupee's value was decreased as a key move by the new government. About 47 tonnes of gold from India's Reserve Bank were sent to the Bank of England to support foreign currency needs.
  • Trade Policy Reforms: Also, RBI sold around 20 tonnes of gold to a Swiss bank, with a plan to buy it back in six months. The government used monetary methods to reduce imports, easing foreign exchange pressure.

These measures helped to restore stability to the Indian economy and paved the way for a period of strong economic growth. It is a reminder of the importance of timely and effective action in addressing economic challenges and maintaining stability in the long term.

Read the article Monetary Policy Committee

Role of Manmohan Singh in Balance of Payment Crisis 1991
  • In 1991, Manmohan Singh, India's Finance Minister, was pivotal in managing the Balance of Payment Crisis.
  • He executed significant economic changes termed the "New Economic Policy" or "LPG" (Liberalization, Privatization, and Globalization) to tackle the crisis.
  • Guided by Singh, the government embraced trade and investment liberalization, reduced bureaucracy, and connected India's economy to global markets.
  • Dr. Singh initiated policies to incentivize foreign investment, simplify trade rules, and boost export-oriented industries.
  • He led negotiations with international financial entities like IMF to secure loans and aid for economic stabilization.
  • Singh's reforms enhanced India's foreign reserves, attracted foreign investment, and spurred economic growth.
  • His contributions are widely acknowledged for reshaping India's economy and establishing the groundwork for its subsequent rapid progress.

Study in detail the Nutrient Based Subsidy Scheme here!

After Effects of Balance Of Crisis

 The balance of payments crisis in India in 1991 had several significant aftereffects on the country's economy and people. Some of the key after-effects include

  • Increased Economic Growth: Following the crisis, the Indian economy grew rapidly, driven by structural reforms and increased investment.
  • Improved Balance of Payments: The balance of payments improved dramatically as the reforms helped to increase exports, reduce imports, and attract greater foreign investment.
  • Increased Foreign Investment: The reforms attracted increased foreign investment, which helped to finance economic growth and spur job creation.
  • Increased Competitiveness: The reforms improved the competitiveness of the Indian economy, helping it to better integrate into the global economy and benefit from increased trade and investment.
  • Greater Economic Efficiency: The reforms led to a more efficient and market-oriented economy, with increased competition and reduced government intervention.
  • Reduced Poverty: The economic growth and job creation that resulted from the reforms helped to reduce poverty and improve living standards for millions of people in India.
  • Reduced Inflation: The reforms helped to reduce inflation, improve monetary stability, and increase investor confidence.

Read the linked article for the UPSC Exam to learn more about the: Basel 3 Norms

Conclusion

The balance of payments crisis in India in 1991 was a critical moment in the country's economic history. Internal and external factors, including macroeconomic imbalances, external shocks, and unsustainable debt levels, triggered the crisis. To address the crisis, the government implemented a series of economic reforms to restore stability to the economy and improve its competitiveness. 

These reforms included devaluing the rupee, reducing government spending, attracting foreign investment, and developing capital markets. The after-effects of the crisis were significant, with increased economic growth, improved balance of payments, greater competitiveness, and reduced poverty. The balance of payments crisis in India in 1991 serves as a reminder of the importance of timely and effective action in addressing economic challenges and maintaining stability in the long term.

Check out the test series for UPSC IAS Exam here. 

We hope all your doubts regarding the “1991 Balance Payment Crisis" are addressed after going through this article. Testbook provides comprehensive notes for different competitive examinations. It has always assured the quality of its product like content pages, live tests, GK and current affairs, mocks, and so on. Ace your preparation with the Testbook App!

More Articles for IAS Preparation

Balance Payment Crisis FAQs

The primary cause of India's balance of payment crisis in 1991 was a combination of factors such as high fiscal deficit, growing current account deficit, declining foreign reserves, and the Gulf War

 Balance of payment crisis is a situation in which a country experiences a sudden and severe shortage of foreign exchange.

In 1991, India was facing a severe balance of payment crisis. The country had a high fiscal deficit, low foreign exchange reserves, and a growing current account deficit, which made it difficult for India to pay for its imports and service its foreign debt. To address the crisis, the government took a series of measures, including devaluing the rupee, implementing fiscal and monetary tightening, and securing a bailout package from the International Monetary Fund (IMF)

The immediate step taken by the government to avoid the BoP crisis in 1991 was to approach the International Monetary Fund (IMF) for a bailout package. The government also devalued the rupee, reduced import tariffs, and implemented fiscal and monetary tightening measures.

The balance of payments crisis in India was primarily caused by high fiscal deficit, low foreign exchange reserves, and growing current account deficit, which were compounded by the Gulf War.

Some of the causes of balance of payment in India are: high fiscal deficit, low foreign exchange reserves, growing current account deficit, trade imbalance, capital flight, and large external debt.
Report An Error
Exams Tests Super Practice