CORE Crisis, Reform, and the 1991 Break
Liberalisation, Privatisation, Globalisation (LPG) Reforms 1991 came from a balance-of-payments crisis, not from a routine policy review. By mid-1991, foreign exchange reserves covered only a small import window, inflation had accelerated, external lenders were cautious, and industrial production was hit by import compression. The reform package therefore attacked four connected barriers: licensing over capacity, high import protection, public-sector dominance in many industries, and restricted foreign investment. Dr. Manmohan Singh's 1991-92 budget speech placed trade policy and industrial policy together because Indian industry needed imported inputs, technology, and export markets. P.V. Narasimha Rao's government gave political cover to this shift. For industrial growth, the decisive change was that firms gradually faced price competition and technology competition instead of depending mainly on administrative permissions. Privatisation was more cautious than liberalisation: India used disinvestment, fewer reserved areas, and later strategic sales, not an immediate wholesale sale of public enterprises. In Rajasthan, the meaning was practical. RIICO industrial areas around Bhiwadi, Neemrana, Jaipur, Jodhpur, Kota, and Bhilwara could attract units only when national policy allowed scale, foreign collaboration, and easier import of machinery. The 1991 change did not remove land, power, logistics, or credit problems, but it changed the question from whether private industry should expand to how fast it could expand under better regulation. The reforms were also sequenced: macro-stabilisation restored external confidence, trade reform made inputs available, industrial reform eased entry, and financial reform later changed credit channels. That sequence explains why an industrial topic cannot be separated from exchange rates, fiscal deficit, bank balance sheets, and infrastructure finance.