Read the following statements carefully and choose the correct option regarding Assertion (A) and Reason (R). Assertion (A): India had to approach the IMF and World Bank in 1991 for a bailout loan. Reason (R): Foreign exchange reserves had declined to the point that they could barely finance two weeks of imports.

Correct — A. A is true. India approached the World Bank and the IMF and, per NCERT, received $7 billion as loan to manage the crisis.

R is true. NCERT says reserves 'declined to a level that was not adequate to finance imports for more than two weeks'.

R explains A. With reserves that low and no lender willing, the Bank and the Fund were the way out: 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 direct cause. NCERT puts it in sequence: reserves too low for two weeks of imports, no lender willing, so India turned to the World Bank and the IMF.
• (c)
  A is true but R is false. — R is true, in NCERT's own words. The reserves were 'not adequate to finance imports for more than two weeks', which is what R says.
• (d)
  A is false but R is true. — A is true. India did approach the World Bank and the IMF in 1991, and NCERT records a $7 billion loan to manage the crisis.

An Assertion-Reason item asks three things in order: is A true, is R true, and does R explain A.

Here the chain comes from NCERT. The balance of payments crisis left India unable to repay foreign borrowings or pay for imports, and no country or international funder would lend.

The loan came with conditions: liberalise, reduce the government's role and remove trade restrictions. India answered with the New Economic Policy.

Key facts

• In 1991 India's foreign exchange reserves were not adequate to finance imports for more than two weeks (NCERT).
• India approached the IBRD, popularly known as the World Bank, and the IMF, and received $7 billion as loan (NCERT).
• The lenders expected India to liberalise, reduce the role of the government and remove trade restrictions.
• India agreed to these conditions and announced the New Economic Policy (NEP).

Common traps

• Marking R as true but not the explanation because it states a number: the low reserves are exactly why India needed the loan.
• Doubting A because the World Bank is formally the IBRD: NCERT names both.

No directly related past PYQ was found.