The economic reforms were introduced in 1991 to overcome the economic crisis related to the external debt and many other factors like -

1. The national income was growing at a very slow rate of 0.8%

2. India was highly indebted and the government was unable to make repayment of loans taken from abroad.

3. Imports were more than exports, there was balance of payment deficit and the foreign exchange reserves collapsed.

4. Inflation level was quite high and so even the prices of essential goods were increased.

5. India was indebted to IMF and World Bank up to the extent of 7 billion dollars.