It manifested in the growing macroeconomic imbalances over the decade in the form of high fiscal deficit, high levels of current account deficit, and increasing levels of short term external debt, besides a repressive and weakened financial system. The immediate provocation for the crisis in 1991 was also a combination of external events that generated liquidity problems on the external front.
The gulf crisis of 1991 not only affected India’s oil imports due to soaring oil prices but also eroded export markets in West Asia, and caused a setback to inward remittances and tourist earnings. The deterioration in exports to Eastern Europe, with the break-up of erstwhile USSR, accentuated the crisis.