Economic reforms — LPG & liberalisation

India's 1991 reforms are best read as a shift from a licensing-control economy to a regulated market economy; they did not mean withdrawal of the State from development.

• Core definition: LPG means three linked changes: liberalisation reduced licensing, price and quantitative controls; privatisation reduced the exclusive public-sector space and introduced disinvestment/competition; globalisation connected India more deeply with trade, capital, technology and global production networks.
• Immediate trigger: the 1990-91 balance-of-payments crisis exposed weak export competitiveness, high fiscal deficit, oil-price shock after the Gulf crisis, heavy short-term external pressure and low foreign-exchange reserves. The reforms were therefore both crisis response and structural correction.
• Policy launch: the Union Budget of July 1991 and the Statement on Industrial Policy of July 24, 1991 form the conventional starting point. P. V. Narasimha Rao was Prime Minister and Manmohan Singh was Finance Minister.
• Not a single event: reforms unfolded through industrial delicensing, rupee devaluation and trade-policy changes, financial-sector reform, tax reform, capital-market regulation, public-sector restructuring, foreign-investment liberalisation, telecom and infrastructure reform, and later GST, IBC and digital public infrastructure.
• Prelims boundary: UPSC usually tests mechanisms and distinctions, not slogans: licensing versus regulation, FDI versus FPI, FERA versus FEMA, public-sector reservation versus strategic disinvestment, tariff versus quantitative restriction, and growth versus inclusive development.
• Continuity point: India retained a mixed-economy Constitution: Directive Principles, welfare spending, food security, labour protection, environmental law and social-sector schemes continued. The State's role changed from producer-controller to regulator, provider of public goods and safety-net designer.
• Analytical caution: LPG did not automatically create inclusive growth. It improved efficiency, competition, foreign-exchange resilience and services exports, but also raised debates on inequality, informalisation, agriculture-industry gaps, regional disparity and regulatory capacity.
• Core exam phrase: calibrated reform, not shock therapy.