During her second term, Indira Gandhi initiated some economic liberalization policies, aiming to stimulate growth and attract foreign investment. However, she also continued to pursue socialist policies to address poverty and inequality.

The sudden death of her younger son, Sanjay Gandhi, in a plane crash in 1980, was a severe personal blow. Sanjay had been a key political advisor, and his death left a void in Indira's inner circle.

The rise of Sikh militancy in Punjab, led by Jarnail Singh Bhindranwale, posed a significant challenge to the government. The demand for a separate Sikh state (Khalistan) escalated tensions in the region.

In response to the escalating violence in Punjab, Indira Gandhi ordered 'Operation Blue Star,' a military operation to flush out Sikh militants from the Golden Temple in Amritsar. The operation resulted in heavy casualties and deeply hurt the sentiments of the Sikh community.

Indira Gandhi was assassinated by her Sikh bodyguards, Satwant Singh and Beant Singh, in retaliation for Operation Blue Star. Her assassination triggered widespread anti-Sikh riots across India.