Step 1: Understanding the Concept:
The year 1991 was a watershed moment for the Indian economy. Facing a severe Balance of Payments crisis, high fiscal deficit, and double-digit inflation, the Indian government moved away from the "License Raj" (a system of heavy regulation and state control) toward a market-linked economy. Under the leadership of PM P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh, the New Economic Policy (NEP) was launched, centered around three core strategies: Liberalisation, Privatisation, and Globalisation (LPG).
Step 2: Detailed Explanation:
1. Liberalisation: This meant "freeing" the economy from bureaucratic hurdles. It involved the abolition of industrial licensing for most industries, allowing the private sector to enter areas previously reserved for the government, and giving businesses the freedom to decide their scale of production and prices.
2. Privatisation: This involved reducing the dominance of Public Sector Undertakings (PSUs). It was implemented through "disinvestment" (selling government equity to the private sector) and allowing private companies to compete with or take over government-run services. The goal was to improve efficiency and reduce the fiscal burden of loss-making PSUs.
3. Globalisation: This was the process of integrating the domestic economy with the global economy. It involved lowering import tariffs (customs duties), removing quantitative restrictions on imports, and encouraging Foreign Direct Investment (FDI). It aimed to make Indian industry more competitive and attract modern technology and foreign capital.
These reforms transformed India from a "closed" inward-looking economy to an "open" outward-looking one, leading to significantly higher growth rates in the following decades.
Step 3: Final Answer:
The acronym LPG represents the three pillars of the 1991 New Economic Policy: Liberalisation, Privatisation, and Globalisation.