What were the reasons for the economic reforms in the 1990s? Make a detailed explanation.

The need for such as new economic policy is mentioned below:
1. The fiscal deficit of the government was increasing due to the increase in nondevelopment expenditure. The fiscal deficit is the difference between total expenditure and total receipt minus receipt. To cover the fiscal deficit the government had to increase the loans. This also implied an increase in public debt and interest payment liability.
2. When the receipt of foreign exchange Falls short of their payment, the problem of negative balance of payment arises. Although the government had adopted a restrictive policy in terms of imports and exports, the expected result was not seen. India's export could not compete with the quality of goods in the market. To cover this deficit, a large amount of foreign loans had to be obtained.

3. In 1990-91, the Iraq war broke which lead to an increase in the price of petrol. The foreign flow from Gulf countries stopped which further increased the problem.
4. The public sector undertakings performed poorly most of these wave in curing loss with an unsatisfactory performance they were not performing well due to the political interference and became a liability for the government.
5. The inflation period increased food grains prices. This deepened the economic crisis.
6. In 1990-1991, the foreign exchange reserve file to a very low level that it became insufficient to pay the import bill for 2 weeks.

Thus, the government decided to introduce the policy of LPG- Liberalisation, privatisation, and globalization.