In 1991, rupee was devalued in two stages and the cumulative devaluation was about _____ percent in USD terms.
Show answer & explanation
Correct answer: A
Explanation
The Historic Devaluation of 1991 - 18
In 1991, India faced a severe balance of payments crisis. Foreign exchange reserves had fallen so low that the country had enough money to cover only two weeks of imports. To address this situation, the Reserve Bank of India (RBI) took the bold decision to devalue the rupee.
Two-Stage Process: This devaluation was carried out in two stages, on July 1 and July 3, 1991.
July 1, 1991: The value of the rupee was reduced by approximately 9%.
July 3, 1991: Just two days later, the value was further reduced by approximately 11%.
Cumulative Devaluation: Combining these two stages, the total cumulative devaluation of the rupee against major international currencies (especially the US dollar) was approximately 18% to 19%.