• After India became independent, there were several major social and economic issues to be addressed for stabilizing the nation. It demanded adopting such an economic system that could uplift India’s ruined economy, solve problems of widespread poverty and provide employment to people.
• To achieve these objectives, the planners of independent India adopted mixed economy i.e. the mixed type of economic system with a major emphasis on socialist pattern of planning.

Need of economic reforms:

1. By 1980s, many experts felt that the planning strategies adopted between 1947 and 1990 failed to attain the goals of economic growth and development. They believed the main reason for the failure was that the states imposed several unnecessary regulations on economic activities which then restricted people from doing economic activities. This raised a need for bringing reforms in the economy to improve it.

2. Another reason was that in the early 90s the international monetary organizations that were controlled by the developed nations of the world imposed a condition on India for providing monetary assistance. As per the condition, until India reduces its excessive and unnecessary controls on the economic activities, it should not be provided any financial assistance.

3. India’s imports were quite high compared to its exports. This caused a severe deficit in India’s ‘balance of trade’ and India had to borrow a lot of foreign exchange from international institutions. Owing to these reasons, India reformed its economic policies in 1991. It also brought all the necessary institutional and regulatory changes needed for the reforms. The economic reforms focused on three major areas namely Liberalization, Privatization and Globalization (LPG).