Economic Reforms of 1991

📖 The 1991 crisis

By mid-1991, India faced a severe Balance of Payments crisis — foreign exchange reserves had fallen to levels barely sufficient to cover a few weeks of imports. The government, under Prime Minister P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh, had to pledge gold reserves to secure emergency loans and turned to the IMF for a bailout, which came with conditions requiring structural economic reform.

🔓 LPG Reforms

The reforms that followed are commonly summarised as LPG:

• Liberalisation — dismantling the License Raj, reducing government control over private industry.
• Privatisation — reducing the role of the public sector, encouraging private participation (including disinvestment of some public sector undertakings).
• Globalisation — integrating India's economy with the world through trade liberalisation, easier foreign investment norms, and currency reforms.

📈 Impact

The reforms are widely credited with unleashing faster economic growth, expanding India's private sector and IT industry, and integrating India more deeply into global trade and investment flows — though debates continue over their impact on inequality and the pace of poverty reduction.