Correct Answer: High inflation and fiscal deficit

Solution : The correct answer is (b) High inflation and fiscal deficit

The 1991 economic policy in India, often referred to as the New Economic Policy or Economic Reforms of 1991, aimed to address the challenges of high inflation and fiscal deficit. Prior to 1991, India was facing a severe economic crisis characterized by high inflation, a widening fiscal deficit, and a balance of payments problem.

The policy reforms implemented in 1991 focused on liberalizing and opening up the Indian economy to promote economic growth and stability. The reforms included measures such as the dismantling of the license raj, reducing trade barriers, encouraging foreign investment and technology transfer, and adopting market-oriented policies.