In which budget was the policy of LERMS announced?

Correct option is B

• The Liberalized Exchange Rate Management System (LERMS) was introduced in the 1992-93 Union Budget.
• This policy was a significant shift from the previous fixed exchange rate regime and aimed to move towards a more market-determined exchange rate system.
• Under LERMS, the government allowed the rupee to be traded in the open market with fewer restrictions, leading to more flexibility in the foreign exchange market.

Additional Information:

• Objective of LERMS: The main aim of LERMS was to reduce the black market for foreign exchange and bring the currency closer to its market value. It replaced the dual exchange rate system with a single market-determined exchange rate.
• Impact: This was a key step in India's economic liberalization process, which also included significant reforms like trade liberalization, industrial deregulation, and financial sector reforms.

Other Options:

• 1991-92: This budget marked the beginning of India's economic liberalization, including significant reforms such as devaluation of the rupee and the introduction of economic reforms, but the LERMS policy was introduced in the following year's budget.
• 1995-96: There was no significant change regarding LERMS in this budget.
• 1990-91: This year was prior to the major economic reforms and the introduction of LERMS.