Previous Year Question

India introduced wide-ranging Liberalisation, Privatisation and Globalisation—LPG reforms under the New Economic Policy of 1991.

At that time, P. V. Narasimha Rao was the Prime Minister of India, and comprehensive economic reforms were undertaken during his government in 1991.

India was then facing a severe Balance of Payments crisis. Foreign exchange reserves had fallen sharply, fiscal imbalances were serious and the country's external-payment position was under considerable pressure. This background accelerated structural economic reforms.

The three major dimensions of the New Economic Policy are commonly described as LPG—

Liberalisation — reduction of licensing, controls and various regulatory restrictions.

Privatisation — expansion of the role of the private sector and reduction of excessive public-sector dominance.

Globalisation — greater integration of the Indian economy with international trade, investment and global markets.

The reform programme included substantial industrial delicensing, trade and import reforms, greater openness to foreign investment, financial-sector reforms and changes in public-sector policy.

An important distinction should be remembered: the reforms were launched under Prime Minister P. V. Narasimha Rao, while Dr. Manmohan Singh was the Finance Minister and played a major role in formulating and implementing the 1991 reform programme.