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Trade reforms and changes in the regulation of foreign direct investment were introduced to open India to foreign trade while stabilising external loans. It is speculated that the tests were actually planned in 1995, during Rao's term in office, He increased military spending, and set the Indian Army on course to fight the emerging threat of terrorism and insurgencies, as well as Pakistan and China's nuclear potentials.

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Narasimha Rao fought and won elections from different parts of India such as Andhra Pradesh, Maharashtra and Odisha. Major reforms in India's capital markets led to an influx of foreign portfolio investment.

the reforms progressed furthest in the areas of opening up to foreign investment, reforming capital markets, deregulating domestic business, and reforming the trade regime. The major economic policies adopted by Rao include: The impact of these reforms may be gauged from the fact that total foreign investment (including foreign direct investment, portfolio investment, and investment raised on international capital markets) in India grew from a minuscule US 2 million in 1991–92 to .3 billion in 1995–96.

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