1) Background: Why 1991 reforms?
India faced a macroeconomic crisis around 1991:
- severe Balance of Payments stress (low forex reserves),
- high fiscal deficit and inflationary pressures,
- external debt and loss of confidence.
Response: stabilization + structural reforms.
2) LPG reforms: meaning
2.1 Liberalization
Reducing controls and regulations:
- industrial delicensing,
- reduced role of licensing/quotas,
- easing entry/exit in many sectors.
2.2 Privatization (disinvestment)
Reducing state role in production/ownership:
- disinvestment in public sector enterprises,
- greater private participation in many industries.
2.3 Globalization
Greater integration with global economy:
- trade liberalization (tariffs reduced),
- encouraging foreign investment (FDI/FPI),
- exchange rate reforms toward market determination.
3) Stabilization vs structural reform (core distinction)
3.1 Stabilization
Short-run policies to restore macro balance:
- reduce fiscal deficit,
- control inflation,
- improve BoP position.