Balance of Payments Crisis — Current Affairs 2026
Current Affairs Connections
India's Foreign Exchange Reserves Touch Record High of $645 Billion
March 2024The achievement of record-high forex reserves in 2024 stands in stark contrast to the 1991 crisis when reserves fell to just $1.2 billion. This transformation demonstrates the success of post-1991 economic reforms in building external sector resilience. The current reserves provide a buffer equivalent to 11 months of imports, compared to just 15 days in 1991. However, the composition and management of these reserves reflect lessons learned from the 1991 crisis, including the importance of maintaining adequate liquidity and avoiding excessive reliance on short-term capital flows.
UPSC Angle: UPSC may ask comparative questions about India's external sector strength in 1991 vs 2024, the role of forex reserves in economic stability, and lessons from the 1991 crisis in current economic management.
Current Account Deficit Concerns Amid Global Economic Uncertainty
January 2024Recent concerns about India's current account deficit widening to 2.1% of GDP in 2023-24 echo the vulnerabilities that led to the 1991 crisis. While the current deficit levels are manageable compared to the 3.1% in 1991, the underlying factors – rising oil imports, trade imbalances, and global economic uncertainty – mirror the pre-crisis conditions. However, India's stronger institutional framework, flexible exchange rate regime, and robust forex reserves provide better crisis management capabilities than were available in 1991.
UPSC Angle: Questions may focus on comparing current CAD management with 1991 crisis lessons, the role of external sector policies in preventing BoP crises, and the effectiveness of post-1991 reforms in building economic resilience.