Survival from the Balance of Payment Crisis: Implications from the Challenges Faced by India

Abstract

Financial crisis has always been a concern for all the countries in the world. The balance of payment crisis has significantly affected India in 1991, which was the worst situation India has ever faced. The crisis has started originating from the fiscal year 1979-80 onwards and continued rising in current account deficit, imports of oil, increased in the growth of imports of goods, decreased in exports, breaking of Soviet-bloc and fiscal indiscipline, all these headed to 1991 balance of payment crisis. However, again in 2012-2013, India’s current account deficit grasped to the lowest point as oil and gold imports were ascended. Furthermore, the increase in imports of non-oil goods caused an increase in the current account deficit, which was the highest after the 1991 crisis. Since the situations of 1991 and 2012, India reformed many policies to prevent this financial crisis in future and make stronghold in the global market. This paper explores the overview of the balance of payment situations in 1991 and 2012 with its impact and remedies. The secondary data is collected from the authenticated sources and analysed to derive findings and suggestions regarding the management of balance of payment in the country. The outcome of the paper provides the lessons to avoid this type of crisis of balance of payment by controlling the import and export by reforming government.