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Martin Martin Jan 9, 2021

Prepare a brief description of the financial crisis of 1991?

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prepare a brief description of the financial crisis of 1991?

The 1991 Indian economic crisis had its roots in 1985 when India began having balance of payments problems as imports swelled, leaving the country in a twin deficit: the Indian trade balance was in deficit at a time when the government was running on a large fiscal deficit.[1] By the end of 1990 in the run-up to the Gulf War, the situation became so serious that the Indian foreign exchange reserves could barely finance three weeks’ worth of imports while the government came close to defaulting on its financial obligations. By July that year, the low reserves had led to a sharp depreciation of the rupee, which in turn exacerbated the twin deficit problem.[2] Chandrasekhar government could not pass the budget in February 1991 [3] at a crucial time when Moody had downgraded India and it further went down after the budget was not passed and global credit-rating agencies further downgraded India from investment grade making it impossible to even get short term loans and the government was in no position to give any commitment to reform the economy. The World Bank and IMF also stopped their assistance, leaving the government with no option except mortgaging the country's gold to avoid defaulting on payments.

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Jan 9, 2021
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