Since independence, India followed a mixed economic structure which combined the advantages of both the socialist and capitalist economies. Some economists are of the belief that the mixed economy resulted in the advocation and framing of a set of policies and laws which hampered the growth of the economy though they were made with the purpose of aiding economic growth. Other economists believe that India has managed to attain a substantial economic growth.
During the year 1991, India was faced with an economic crisis because of her external debt. The government was not able to repay the money it had borrowed from abroad. The foreign exchange reserves which are maintained to import petrol and other important commodities dipped down alarmingly to levels which were insufficient to last even a fortnight. The escalating price of essential goods further added to the problem. These prompted the government to introduce a new set of policies which changed the direction of our economic strategies.