Liberalisation - It refers to the process of making simplification in the rule and regulations for Private sector. In this process Govt. opens the door for the private sector to enter in the industry and compete with the other firms.

In 1991 Govt make economic reforms to encourage Foreign direct investment.

Reasons for economic reforms.

1. Poor performance of the Govt. sector, All the Govt. enterprises were running in loss.

2. Poor quality of products, as there were no pvt sector to compete with Govt sector. There fore Govt firms started producing low quality of goods.

3. Customer dissatisfaction, there were dissatisfaction among customer because of low quality of goods produced by Govt firms.

4.Lack of Foreign Currency- Since that time Govt doesn't allowed the foreign firms to enter in the market there fore there were lack of FDI,which results in shortage in stock of Foreign Currency.

Remarks - On that time India economy was at its worst stage. They don't even have enough Foreign exchange to purchase required amount of food grains. They Govt approached the WORLD BANK, IMF to give loan but they asked Indian Govt to mortgage its Gold reserve and asked to do economic reforms.This results in Economic reforms 1991.