1991 didn't just change the economy — it changed what government itself does.
Before 1991, the Indian state acted as a direct producer and controller of economic activity — through licensing (the "License Raj"), public sector dominance, and tight import controls. Post-1991 LPG reforms (Liberalisation, Privatisation, Globalisation) gradually shifted the state's role from direct controller to facilitator and regulator — dismantling licensing requirements, opening sectors to private and foreign investment, and creating independent regulators for newly liberalised sectors.
As the state withdrew from direct control, it created arm's-length regulatory bodies to oversee liberalised sectors — SEBI (securities markets, made statutory in 1992), TRAI (telecom, 1997), and IRDAI (insurance, 1999) are the clearest examples. This reflects a broader governance shift: instead of the government directly running enterprises, it sets rules and lets independent bodies enforce them impartially.
The reforms also raised new governance questions: ensuring regulatory independence from political interference, managing the social costs of disinvestment and labour displacement, and addressing widening regional and rural-urban inequality as growth concentrated in certain states and sectors — pushing governance reform toward greater emphasis on inclusive growth and social safety nets alongside market-oriented policy.
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