Abstract
Economic liberalisation has widened the scope to adopt new model of development for Indian states to plan fiscal space management and improve on the service delivery. This paper attempts to understand how this model is theorised and implemented under the evolving context of reform in Karnataka. It is a process analysis of the reform period to identify and explain the role of reform instruments (strategies, techniques and tactics) as advocated by the World Bank in restructuring the state economy and reorienting the governance system. It suggests that contextual determinants need to be studied thoroughly to understand the governmental rationality behind policy decisions. It argues that reform outcome should be measured against the success of reform instruments (process indicators) instead of only depending on impact indicators.