The correct option is 2 only
Explanation
The 1991 economic crisis in India was primarily a Balance of Payments (BoP) crisis, characterized by a severe depletion of foreign exchange reserves. To resolve this, the Indian government sought immediate financial assistance from global financial institutions.
Statement 1 is Incorrect: To manage the crisis, India approached the International Bank for Reconstruction and Development (IBRD), commonly known as the World Bank, and the International Monetary Fund (IMF). India secured a loan of approximately $7 billion to address the immediate liquidity crunch.
Statement 2 is Correct: The financial assistance provided by these institutions was conditional. They expected India to liberalize the economy by removing restrictions on the private sector and reducing trade barriers. Contrary to the statement, the conditionality required a reduction in the role of the government in economic activities, not an increase.
Statement 3 is Incorrect: India agreed to the conditionalities set by the World Bank and the IMF. Consequently, the government announced the New Economic Policy (NEP) in July 1991. This marked a departure from a closed, protectionist framework to an open economy based on Liberalization, Privatization, and Globalization (LPG).
Key Takeaway: The 1991 crisis and subsequent IMF-World Bank loans necessitated the adoption of the Structural Adjustment Program, shifting India from a state-controlled economy to a market-oriented one.