Q.Explain briefly the three components of the LPG reforms of 1991.

This question requires a concise explanation of each LPG component with a defining example.

The 1991 New Economic Policy rested on three interlinked components, together known as LPG:

Liberalisation reduced government regulation of economic activity — most industries were freed from compulsory industrial licensing, import tariffs were lowered and simplified, and controls on interest rates and foreign exchange were eased, giving markets and private enterprise a larger role.

Privatisation reduced the government's direct role in production. In India this mainly took the form of disinvestment — selling a portion of the government's equity in public sector undertakings to private investors or the public — aimed at improving PSU efficiency, cutting losses, and raising resources, generally without a full transfer of ownership. …

Students often describe privatisation as 'selling off government companies completely' — in most Indian cases it was partial disinvestment, not full ownership …