The economy of India has transitioned from a mixed planned economy to a mixed middle-income developing social market economy with notable state participation in strategic sectors.[45] It is the world's fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP). According to the International Monetary Fund (IMF), on a per capita income basis, India ranked 139th by GDP (nominal) and 127th by GDP (PPP).[46] From independence in 1947 until 1991, successive governments followed Soviet style planned economy and promoted protectionist economic policies, with extensive state intervention and economic regulation. This is characterised as dirigism, in the form of the Licence Raj.[47][48] The end of the Cold War and an acute balance of payments crisis in 1991 led to the adoption of a broad economic liberalisation in India.[49][50] Since the start of the 21st century, annual average GDP growth has been 6% to 7%.[45] The economy of the Indian subcontinent was the largest in the world for most of recorded history up until the onset of colonialism in early 19th century.[51][52][53] India account for 7.2% of global economy in 2022 in PPP terms, and around 3.4% in nominal terms in 2022.
India still has informal domestic economies; COVID-19 reversed both economic growth and poverty reduction; credit access weaknesses contributed to lower private consumption and inflation; and new social and infrastructure equity efforts.[56] Economic growth slowed down in 2017 due to the shocks of "demonetisation" in 2016 and the introduction of the Goods and Services Tax in 2017.[57] Nearly 70% of India's GDP is driven by domestic consumption.[58] The country remains the world's sixth-largest consumer market.[59] Apart from private consumption, India's GDP is also fueled by government spending, investments, and exports.[60] In 2022, India was the world's 6th-largest importer and the 9th-largest exporter.[61] India has been a member of the World Trade Organization since 1 January 1995.[62] It ranks 63rd on the Ease of doing business index and 68th on the Global Competitiveness Report.[63] Due to extreme rupee/dollar rate fluctuations India's nominal GDP too fluctuates significantly.[64] With 476 million workers, the Indian labour force is the world's second-largest.[19] India has one of the world's highest number of billionaires and extreme income inequality.[65][66] Because of several exemptions, barely 2% of Indians pay income taxes.[67][68]
During the 2008 global financial crisis, the economy faced a mild slowdown. India endorsed Keynesian policy and initiated stimulus measures (both fiscal and monetary) to boost growth and generate demand. In subsequent years, economic growth revived.[69] According to the World Bank, to achieve sustainable economic development, India must focus on public sector reform, infrastructure, agricultural and rural development, removal of land and labour regulations, financial inclusion, spur private investment and exports, education, and public health.[70] Over 66 million Indians are categorised as middle class, and just 16 million are upper middle class, according to a 2021 Pew Research Center survey.
