In which year did India adopt a dual exchange rate for the interim period?

Correct option is D

Correct Answer: (d) 1992
Explanation: India adopted a dual exchange rate system in 1992 as part of the economic reforms initiated after the 1991 balance of payments crisis. This system, known as the Liberalized Exchange Rate Management System (LERMS), allowed for two exchange rates for foreign currency transactions:
1. Official exchange rate for government and essential imports.
2. Market-determined exchange rate for other transactions.
This move was an interim measure to transition from a fixed exchange rate regime to a more liberalized and market-driven system. It aimed to address the economic crisis, stabilize the foreign exchange market, and eventually led to the adoption of a fully convertible exchange rate system in subsequent years.
Key Facts (Exam-Oriented):
· The dual exchange rate system was introduced under the Economic Reforms of 1991-92.
· LERMS (Liberalized Exchange Rate Management System) was implemented in March 1992.
· It marked the first step towards a unified market-driven exchange rate in India.
· The dual system helped ease the foreign exchange crisis and attract foreign investments.
· In 1993, the dual exchange rate system was replaced by a single unified exchange rate system.