SSC CGL 2025 Tier-I · 17 September 2025, Shift 1 · General Awareness · Question 22 of 100

We transcribed this text from the pictures on a candidate's response sheet for this shift; the answer is the key SSC colour-marked on that sheet. Solution last reviewed 13 September 2026.

Where this paper and its answers come from

SSC does not publish CGL question papers or a public answer key. From 2025 the candidate response sheet prints every question and option as a picture, so the text here is transcribed from those pictures for this shift and checked against them independently; where the layout carries meaning, the picture is shown as well. Each answer is the key SSC colour-marked on that sheet. SSC released a tentative key for challenge and later its final one, both only to candidates behind a login, and the sheet does not say which of the two it carries. The solutions are written by UnlockIAS.

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): Liberalized trade policies increased both exports and capital inflows.

(a)Both A and R are true and R is the correct explanation of A.
(b)Both A and R are true but R is not the correct explanation of A.
(c)A is true but R is false.
(d)A is false but R is true.

Answer

Why

Correct — A. A is true. India entered 1991 in a balance-of-payments crisis, and its reserves recovered strongly once the reforms took hold.

R is true and explains A. Freer trade and investment rules raised exports and capital inflows, and both bring foreign exchange into the country. That causal link is option (a).

Why the others are wrong

(b)
Both A and R are true but R is not the correct explanation of A. — R is the cause, not a side fact. Reserves are built from export earnings and capital inflows, so a rise in both is exactly why reserves grew.
(c)
A is true but R is false. — R is not false. After 1991 exports rose and foreign investment flowed in once the rules on it were eased.
(d)
A is false but R is true. — A is not false. Reserves had fallen to crisis level before the reforms and grew strongly after them, which is the recovery A describes.

Concept

Foreign exchange reserves are the foreign currency assets, gold, SDRs and IMF reserve tranche held by the RBI.

In 1991 they ran so low that India faced a balance-of-payments crisis and turned to the IMF and World Bank for loans.

The reforms that followed eased trade and investment controls and moved the rupee towards a market-set rate. Export earnings and capital inflows then rebuilt the reserves.

Strictly, capital inflows grew because investment rules were eased, not trade rules alone. The stem folds both into 'liberalized trade policies', and the key accepts R as the explanation.

Key facts

India's foreign exchange reserves consist of foreign currency assets, gold, SDRs and the reserve tranche position with the IMF.
In 1991 reserves fell so low that India sought loans from the IMF and World Bank.
The short-term stabilisation measures of 1991 aimed to control inflation and restore the balance of payments.

Study next

Balance of payments: current account and capital accountForeign direct investment versus foreign portfolio investmentThe 1991 devaluation of the rupee and the move to a market-determined exchange rate

Common traps

Picking (b) because R speaks of trade rather than reserves: reserves are what export earnings and capital inflows add up to.
Thinking the reforms caused the reserve shortfall: the shortfall came first, and the reforms answered it.

The crisis itself is asked at 17 Sep 2025, 16:00, GA Q.22 (keyed (a), on reserves barely covering two weeks of imports) and GA Q.21 (keyed: shortage of foreign exchange). The aim of the stabilisation measures is asked at 23 Sep 2025, 16:00, GA Q.25.

Related PYQs

No directly related past PYQ was found.

Topic: Economic Scene — all 144 SSC CGL questions on it, every solved shift.