The late 1980s were marked by ambitious economic policies under the Rajiv Gandhi government, which devised a bold investment strategy to achieve an annual growth target of 5 percent per annum. The Seventh Five-Year Plan (1985–90) relied heavily on borrowed funds to support the required investments. While these loans initially strengthened infrastructure and industries, they soon proved to be unsustainable, diving India into a severe balance-of-payments (BOP) crisis by the early 1990s. Later India was unable to finance essential imports or service debts due to declining of the foreign exchange reserves.

Amid this economic turmoil, the then Finance Minister Late Manmohan Singh, under Prime Minister P.V. Narasimha Rao, initiated a series of landmark reforms collectively known as LPG—Liberalization, Privatization, and Globalization. Singh’s strategy aimed to stabilize the economy and integrate India into global markets. Key measures included the devaluation of the rupee to make exports competitive, lifting import restrictions, and encouraging foreign direct investment (FDI) to revive industries. These reforms ended years of restrictive trade policies and encouraged a free-market system.

The impact was transformative. The GDP growth rate surged, foreign reserves stabilized, and sectors such as IT, telecommunications, and manufacturing flourished. Millions of jobs were created, and poverty levels began to decline significantly. However, the reforms encountered pushback from groups hesitant to let go of self-reliance.

Despite the challenges, 1991 remains a turning point in India’s economic narrative. The bold decisions taken by Singh and his team not only revived a collapsing economy but also charted a new path for sustained growth and global integration—a legacy that continues to inspire India’s economic strategies today.