Which of the following was the key issue during launch of eighth five year plan of India?
I. Worsening balance of payment position.
II. Rising debt burden.
Show answer & explanation
Correct answer: C
Explanation
The Eighth Five-Year Plan (1992-1997) and the Economic Crisis
The Eighth Five-Year Plan was launched during the most challenging period in India's economic history. During 1990-91, India faced a severe economic crisis, the main causes of which were:
Balance of Payments Crisis: India's foreign exchange reserves had fallen so low that they were sufficient to cover only two weeks of imports. The Gulf War led to a rise in crude oil prices and a decline in exports, further exacerbating this situation.
Rising Debt Burden: The government's interest payment burden had increased significantly due to the massive internal and external debt incurred during the 1980s. The fiscal deficit was at its highest level.
Key Features of the Eighth Five-Year Plan:
As a solution to this crisis, the then Prime Minister P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh adopted the policy of 'liberalization, privatization, and globalization' (LPG).
Goal: Human resource development (employment, education, and public health) was given top priority.
Success: This plan was highly successful. An average annual growth rate of 6.8% was achieved, against the target of 5.6%.
During this plan, India became a member of the World Trade Organization (WTO) on January 1, 1995.