Comprehending the Pre and Post Economic Turbulence Calamity of India: The Realization Message from the Nineties

This paper seeks to improve the understanding of the economic turbulence calamity, balance of payment crisis, and reforms in India during the nineties. A balance of payment (BOP) is a double-entry system where all the economic transactions between the country and the rest of the world in a particular period. This paper also helps us to understand the components of the balance of payment. The primary purpose of this paper is to understand the trend of the balance of payment crisis, to know India’s position and also the reasons behind such trends. The significance of the balance of payment has also been discussed in this paper. In this paper, it is studied how the period has been divided into three sub-periods depending on the nature of the balance of payment problems. The issues relating to the management of balance of payments are the linkages between fiscal and external policies, trade strategy, exchange rate management, and foreign currency reserves. The reasons for the satisfactory balance of payments situation in the post-reform period were high earnings from invisible, rise in external commercial borrowings, Non-residents deposits and role of foreign investment. India faced a severe balance of payment crisis and to overcome such crisis; government had to do ‘Crisis Management.’ This paper comprises different types of balance of payment namely balance BOP, surplus BOP and deficit BOP. The government had to approach to International Monetary Fund (IMF) and World Bank to solve the crisis problem by adopting the new economic policy.