Answer» - After independence, India adopted a mixed economic system with focus on socialist pattern of planning.
- 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.
- Moreover, 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 economic activities, it should not be provided any financial assistance.
- 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.
- Under all these circumstances India had no choice but to bring reforms and transform the nation. Hence, India was compelled to bring economic reforms.
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