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India's Foreign Exchange Crisis Analysis

India faced a foreign exchange crisis in 1990-91, as commercial banks stopped lending, non-resident Indians withdrew deposits, and shortages of foreign exchange forced a massive import squeeze that halted industrial growth and caused negative economic growth starting in May 1991. This document examines questions about how India historically managed with low external capital inflows, had little impact from the 1980s third world debt crisis, and how it improved its debt ranking over the following decades.

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Harpreet
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22 views1 page

India's Foreign Exchange Crisis Analysis

India faced a foreign exchange crisis in 1990-91, as commercial banks stopped lending, non-resident Indians withdrew deposits, and shortages of foreign exchange forced a massive import squeeze that halted industrial growth and caused negative economic growth starting in May 1991. This document examines questions about how India historically managed with low external capital inflows, had little impact from the 1980s third world debt crisis, and how it improved its debt ranking over the following decades.

Uploaded by

Harpreet
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

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commercial
commercial banks had stopped lending to India. Non-resi
Non-resident
dent Indians were withdra
withdrawing
wing their 

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deposits. Shortages of foreign exchange had forced a massive import squeeze, which had halted 
 the rapid industrial growth of earlier years and had produced negative growth rates from May
1991 onwards".
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With this background a study on India’s external debt would obviously raise certain questions
such as: how did India manage historically with a very low volume of external capital inflows;
how is that the third world debt crisis of early 80s had a little impact; how is it then that India got
into a massive foreign exchange crisis in 1990-91; how was India spared from the contagious
currency crisis of 1997; and how did India managed to improve her rank from what was third 
debtor after Brazil and Mexico in 1991 to eighth in 2002 in the list of the top fifteen debtor 
countries(as per the Global Development Finance report 2004 published by the World Bank).

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