Balance of payment crisis: lessons from Indian payment crisis for developing economies Online publication date: Mon, 12-Jul-2021
by Ashutosh Kolte; Mauro Rossi; Olimpia Torriero; Ameya Patil; Avinash Pawar
International Journal of Behavioural Accounting and Finance (IJBAF), Vol. 6, No. 3, 2021
Abstract: India has undergone two major economic crises since its independence, which were connected to the balance of payment (BOP) difficulties of 1991 and 2013. As a result of insufficient foreign exchange reserves for making payments, the crisis in 1991 presented itself because of the BOP difficulties. The nation was then forced to take loans from the IMF to open up the economy to the world. This led to economic changes being adopted through liberalisation, privatisation and globalisation (LPG) policy. The 2013 crisis experienced a major decrease in its currency value. These two crises have had an impact on the economy. This paper aims to study the BOP crisis of 1991 and 2013 and identify major factors responsible for these crises with root causes, and providing suggestions for prevention of future BOP crisis, including fiscal restraint, reduction of excessive imports, diversification of export destinations, abolition of the mechanism of inverted duty and flexible system of exchange rates.
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