IIT JEE Advanced 2006 Paper 1

Lactones are formed when a carboxylic acid with a hydroxyl group on the adjoining carbon, undergoes intramolecular esterification.
From the given compounds,

first undergoes intramolecular Cannizzaro’s reaction to yield carboxylic compound with hydroxyl group, which on intramolecular esterification in acidic medium leads to the single product, lactone. The following is the sequence of reactions: