LPG policy

LPG policy was started in 1991 under the tutelage of Dr Manmohan Singh. The need for the new reforms was because of India's debt structure of the time. India was under the fixed exchange rate system and due to high import. Trade deficits widened so there was a balance of payment crisis. So India ran out of ts foreign currency and ultimately a huge debt was issued by IMF. In order to finance the debt, the currency system has to be changed from fixed to managed floating system. This bailout was provided on the condition that India will change some of it's existing law, and thus Narasimha Rao committee passed the LPG policy. It is interesting to look that the trade balance of India was worsening from the 85's only, but no step was taken by the then Congress government.

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