India met with an economic crisis in 1991, due to a number of causes. Some of them were:

1. Inefficient management of the Indian economy in 1980's. The government was not able to generate sufficient revenue from internal sources such as taxation.
2. In the late 1980's, government's expenditure was greater than its revenue by huge amount.
3. Prices of many essential goods rose sharply.
4. Foreign exchange reserves declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest needed to be paid to international lenders.

So, on account of the above causes and pressure from international organisations like the World Bank and IMF, India adopted a New Economic Policy in 1991.