Read the following statements carefully and choose the correct option regarding Assertion (A) and Reason (R).
Assertion (A): The 1991 reforms led to the opening of the Indian economy to foreign investors.
Reason (R): The government wanted to increase domestic savings rate rapidly.
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. A is true but R is false.
The 1991 New Economic Policy introduced Liberalization, Privatization, and Globalization (LPG) to address a severe Balance of Payments crisis, successfully opening India to foreign investment. However, the primary motive was not to increase the domestic savings rate, but rather to invite foreign capital, improve efficiency, and stabilize the economy. Domestic savings are influenced by internal fiscal policies and income levels, rather than the act of opening the economy to international players.