The 1991 reforms boosted India foreign exchange reserves significantly.

Question

Read the following statements carefully and choose the correct option regarding Assertion (A) and Reason (R).

Assertion (A): The 1991 reforms boosted India foreign exchange reserves significantly.

Reason (R): Liberalised trade policies increased both exports and capital inflows.

1. A. Both A and R are true and R is the correct explanation of A. (Correct answer)
2. B. Both A and R are true but R is not the correct explanation of A.
3. C. A is true but R is false.
4. D. A is false but R is true.

Correct Answer

Option A — Both A and R are true and R is the correct explanation of A.

Detailed Solution & Explanation

The correct answer is Both A and R are true and R is the correct explanation of A..

Key Points

• Assertion ✓ — the 1991 reforms sharply lifted India's foreign-exchange reserves over the following years.
• Reason ✓ — liberalised trade and investment boosted exports, FDI and capital inflows.
• And R genuinely *explains* A: rupee devaluation, dismantling of trade barriers and balance-of-payments reforms are precisely why reserves recovered from the 1991 crisis.
• In assertion–reason questions, confirm each is independently true first, then test whether the reason is the actual mechanism behind the assertion.