<P> In the late 1970s, the government led by Morarji Desai eased restrictions on capacity expansion for incumbent companies, removed price controls, reduced corporate taxes and promoted the creation of small - scale industries in large numbers . </P> <P> The collapse of the Soviet Union, which was India's major trading partner, and the Gulf War, which caused a spike in oil prices, resulted in a major balance - of - payments crisis for India, which found itself facing the prospect of defaulting on its loans . India asked for a $1.8 billion bailout loan from the International Monetary Fund (IMF), which in return demanded de-regulation . </P> <P> In response, the Narasimha Rao government, including Finance Minister Manmohan Singh, initiated economic reforms in 1991 . The reforms did away with the Licence Raj, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors . Since then, the overall thrust of liberalisation has remained the same, although no government has tried to take on powerful lobbies such as trade unions and farmers, on contentious issues such as reforming labour laws and reducing agricultural subsidies . By the turn of the 21st century, India had progressed towards a free - market economy, with a substantial reduction in state control of the economy and increased financial liberalisation . This has been accompanied by increases in life expectancy, literacy rates and food security, although urban residents have benefited more than rural residents . </P> <P> While the credit rating of India was hit by its nuclear weapons tests in 1998, it has since been raised to investment level in 2003 by Standard & Poor's (S&P) and Moody's . India experienced high growth rates, averaging 9% from 2003 to 2007 . Growth then moderated in 2008 due to the global financial crisis . In 2003, Goldman Sachs predicted that India's GDP in current prices would overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035, making it the third - largest economy of the world, behind the US and China . India is often seen by most economists as a rising economic superpower which will play a major role in the 21st - century global economy . </P>

The year 1991 is an important date in the history of​ india's economy because in this​ year
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