INDIA WATCH: THE 1991 ECONOMIC REFORMS

Narasimha Rao, Indian Minister for Foreign Affairs.

Date19 September 1983

Source:  https://audiovisual.ec.europa.eu/en/photo-details/P-001617~2F01-8

Author:  Christian Lambiotte - European Commission

licensed under the Creative Commons Attribution 4.0 International license.

Attribution: © European Union, 2025

Via WIKIMEDIA COMMONS 

Manmohan Singh Hindi Biography

Author:  Hindi Education24

available under the Creative Commons CC0 1.0 Universal Public Domain Dedication

Via WIKIMEDIA COMMONS 

THE 1991 ECONOMIC REFORMS 

The 1991 economic reforms in India, formally launched on July 24, 1991, were a watershed moment that set the foundation for India's modern economic landscape. These reforms, initiated under Prime Minister P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh, aimed to address the severe economic crisis India faced at the time, including a balance of payments deficit and plummeting foreign exchange reserves.

Key highlights and timeline of the reforms:

July 1991: The government launched the New Economic Policy focused on liberalisation, privatisation, and globalisation (the LPG model).

The rupee was devalued to boost exports.

Industrial licensing requirements were abolished for most sectors, ending the restrictive License Raj.

Public sector reservation was reduced, allowing private participation in industries like telecom and civil aviation.

Foreign direct investment (FDI) caps were raised, and a board was established to promote foreign investment.

Trade barriers were lowered, import licensing dismantled, and import duties progressively reduced.

Financial sector reforms liberalised interest rates and permitted private sector banks entry.

Fiscal discipline and monetary tightening measures controlled inflation and reduced deficits.

Impacts following these reforms:

India's GDP growth accelerated from an average of around 3.5% pre-1991 to consistently above 6%  - some years approaching double-digit growth.

        

investment inflows surged, bringing capital, technology, and managerial expertise.

The private sector expanded dramatically, leading innovation and job generation.     

India’s foreign exchange reserves grew from just a few weeks of import cover to record highs.

Trade and globalization integration grew, with India joining the WTO and G20.

While poverty reduced significantly, income inequality became an emerging concern.

These reforms transformed India from a closed, centrally planned economy to a more market-oriented and globally integrated one, laying the groundwork for India’s emerging economic power status today

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