Manmohan Singh’s 1991 LPG Reforms: The Turning Point for Adani’s Business Journey

India was on the verge of economic collapse in 1991 when foreign exchange reserves dwindled to historic low levels that could only cover a few weeks of imports with the widening fiscal deficit, rising inflation, and India facing a severe balance of payment crisis. The list of challenges didn’t stop here, the collapse of Soviet Union --- India’s key trading partner --- affected the supply of cheap oil and raw materials as the transcontinental country had cut off the major source of these essential items.

These deteriorating indicators had hit the Indian economy hard, while calling for urgent and bold action from the PV Narasimha Rao government. So then-finance minister Manmohan Singh, a seasoned economist and former RBI governor, took charge of the dire economic scenario and introduced path-breaking reforms in the 1991 Budget to stabilise the economy for long-term growth.

Singh dismantled “Licence Raj” which restricted businesses to operate in the country. Licenses were difficult to get under this system. Sometimes, businesses even had to receive approval from up to 80 agencies before getting a license for the production process. The rule was in place from 1950s to 1991. During this period, the state had power to decide what to produce, in how much quantity, market price, and the capital used in production.

However, Singh introduced economic reforms focused on liberalisation, privatisation, and globalisation (LPG) which opened the doors for the Indian economy to recover. This transformed the country’s economic structure from centrally planned to market-driven, allowing foreign direct investment (FDI) of up to 51 per cent. The end of licence raj not only pushed the Indian economy on the path of development and progress, but also led to the rise of entrepreneurs like Gautam Adani.

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1991 Reforms Fueled Adani's Rise

Adani Group Chairman Gautam Adani had often shared key moments from the his entrepreneurial journey that were influenced by 1991 economic reforms. These reforms lowered import tariffs and opened the doors for foreign investors which created a fertile environment for Indian businesses to thrive.

The industrialist seized the opportunity and expanded his trading operations. By 1991, he established a global trading house in polymers, metals, textiles, and agri-products. And within two years, it became the largest global trading house in the country because LPG policy changed the business landscape drastically. In 1994, Adani Exports now Adani Enterprises, IPO was launched and it was a great success that marks the second big break in his entrepreneurial journey.

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"My entrepreneurial journey got a big push in 1991 when the duo of PM Narasimha Rao and FM Manmohan Singh started sweeping economic reforms. Just like other entrepreneurs, I too, benefitted from those reforms," Adani had said as quoted by India Today. He termed 1991 reforms as "major turning point" for the Indian economy.

While offering his condolences on the demise of Manmohan Singh who lost his life on Thursday, Adani called the former PM's 1991 reforms "transformative" that shaped India and opened its doors to the world.

"Deeply saddened by the passing of Dr Manmohan Singh. History will forever honour his pivotal role in....rare leader who spoke softly but achieved monumental strides through his actions, Dr Singh's life remains a masterclass in leadership, humility and service to the nation and will inspire generations to come," he wrote on X.

Adani's journey began much earlier. At the age of 16, he reached Mumbai but returned to Mumbai in 1981 to support his family's polymer business. During this period, Adani experienced severe shortages of raw materials due to stringent import curbs. But then-Prime Minister Rajiv Gandhi eased these constraints and unlocked new opportunities for businesses. He took a calculated risk and established a trading organisation in 1985, setting the foundation for his success as one of the leading industrialists he is today.