The gross fiscal deficit as a ratio to GDP in India had climbed to _____ per cent by 1990-91.
Show answer & explanation
Correct answer: A
Explanation
India's Gross Fiscal Deficit as a percentage of GDP had risen to 10 percent by 1990-91 (accurately between 8.4% and 9.4%, often rounded to around 10%).
This was the period when India faced a severe economic crisis (Balance of Payments crisis), which led to the implementation of the landmark economic reforms of 1991 (LPG - Liberalization, Privatization, and Globalization).
The main causes of the 1990-91 economic crisis:
High fiscal deficit: Government expenditure far exceeded its income.
Depleted foreign exchange reserves: India had only enough foreign exchange to cover two weeks of imports.
Gulf War: The sudden increase in crude oil prices further exacerbated the trade deficit.
Inflation: The prices of essential commodities were rising rapidly.