LPG Reforms of 1991
The supplied resource covers the 1991 economic reforms and their later institutional consequences. This lesson groups the facts into causes, the three LPG components, major measures, institutions and impacts.
1. Why the reforms were introduced
The source material describes the 1990–91 crisis context, including severe foreign-exchange pressure, a high fiscal deficit and the Gulf War’s effect on crude oil prices. It states that India had foreign-exchange reserves sufficient for only about two weeks of imports and that gold was pledged to obtain emergency foreign exchange.
2. The three letters: LPG
| Letter | Meaning | Core idea in the source |
|---|---|---|
| L | Liberalisation | Reduce controls and allow greater role for market forces |
| P | Privatisation | Reduce government role in production and encourage private participation |
| G | Globalisation | Integrate India’s economy with the world economy |
3. Liberalisation
- Industrial licensing was abolished for most industries according to the source.
- Trade liberalisation included reduction of import licensing.
- The source connects liberalisation with allowing market forces a greater role in production, prices and investment.
4. Privatisation
The source describes privatisation as reducing the government’s role in production and encouraging private participation. It mentions strategic sale, including BALCO, and public–private partnership as an example of government and private firms working together on projects such as roads.
5. Globalisation
The supplied material defines globalisation as integrating India’s economy with the world economy. It also notes India’s founding membership of the WTO in 1995.
6. Institutions and later reforms
- SEBI received statutory powers in 1992 according to the source.
- Current Account Convertibility was introduced in 1994 in the supplied notes.
- The source states that India had not adopted full Capital Account Convertibility.
- The Narasimham Committee I (1991) is linked to banking reforms including reduced SLR and CRR.
- The Narasimham Committee II was constituted in 1998.
- FEMA replaced FERA in 2000.
- The Competition Act is dated 2002 in the source and the Competition Commission of India became operational in 2009.
- GST is listed as a reform introduced in 2017.
7. Positive and negative impacts
The supplied notes list higher foreign investment, technology transfer/technology adoption, consumer choice, productivity and the growth of IT and services among positive effects. They also list income inequality and uneven regional benefits among negative or uneven outcomes.