India's New Industrial Policy (NIP) of 1991 marked a watershed moment, fundamentally transforming the country's economic landscape from a state-controlled, protectionist regime to a more liberalized and market-oriented system. Driven by a severe balance of payments crisis, the NIP introduced a series of reforms often summarized as LPG: Liberalization, Privatization, and Globalization.

Liberalization involved significantly reducing government control and restrictions on industries. Industrial licensing was abolished for most sectors, except for a few strategic and environmentally sensitive industries. This allowed greater freedom for entrepreneurs to establish, expand, and diversify businesses. Restrictions on imports of capital goods and raw materials were also eased.

Privatization aimed at reducing the dominance of the public sector and enhancing efficiency. It involved disinvestment in Public Sector Undertakings (PSUs), selling government stakes to private entities, and opening up sectors previously reserved for the public sector (like telecommunications, power, and civil aviation) to private investment.

Globalization sought to integrate the Indian economy with the global economy. This was achieved by promoting Foreign Direct Investment (FDI) through increased equity limits for foreign investors and simplifying approval processes. Import duties and tariffs were significantly reduced to encourage international trade and competition. The NIP's primary objectives were to boost industrial growth, enhance competitiveness, attract foreign capital and technology, and improve overall economic efficiency, leading to a period of accelerated economic growth and diversification of the industrial base.