Until 1991, all Indian governments followed protectionist policies that were influenced by socialist economics. Widespread state intervention and regulation largely walled the economy off from the outside world. An acute balance of payments crisis in 1991 forced the nation to liberalize its economy; since then, it has moved increasingly towards a free-market system by emphasizing both foreign trade and direct investment inflows. India has been a member of World Trade Organization since 1 January 1995.
The 522-million-worker Indian labor force is the world’s second largest, as of 2017. The service sector makes up 55.6% of GDP, the industrial sector 26.3% and the agricultural sector 18.1%. India’s foreign exchange remittances of US$100 billion in 2022, highest in the world, were contributed to its economy by 32 million Indians working in foreign countries. In 2006, the share of external trade in India’s GDP stood at 24%, up from 6% in 1985. In 2008, India’s share of world trade was 1.7%; In 2021, India was the world’s ninth-largest importer and the sixteenth-largest exporter. Between 2001 and 2011, the contribution of petrochemical and engineering goods to total exports grew from 14% to 42%. India was the world’s second-largest textile exporter after China in the 2013 calendar year.
Averaging an economic growth rate of 7.5% for several years before 2007, India has more than doubled its hourly wage rates during the first decade of the 21st century. Some 431 million Indians have left poverty since 1985; India’s middle classes are projected to number around 580 million by 2030. In 2024, India’s consumer market was the world’s third largest. India’s nominal GDP per capita increased steadily from US$308 in 1991, when economic liberalization began, to US$1,380 in 2010, to an estimated US$2,731 in 2024. It is expected to grow to US$3,264 by 2026.
Socio-economic challenges
A 2018 Walk Free Foundation report estimated that nearly 8 million people in India were living in different forms of modern slavery, such as bonded labor, child labor, human trafficking, and forced begging. According to the 2011 census, there were 10.1 million child laborers in the country, a decline of 2.6 million from 12.6 million in 2001. Since 1991, economic inequality between India’s states has consistently grown: the per-capita net state domestic product of the richest states in 2007 was 3.2 times that of the poorest. Corruption in India is perceived to have decreased. According to the Corruption Perceptions Index, India ranked 78th out of 180 countries in 2018, an improvement from 85th in 2014.
As of 2025, poverty in India had declined sharply. According to the World Bank report, extreme poverty fell from 16.2% in 2011-12 to 2.3% in 2022-23. In rural areas, it fell from 18.4% to 2.8%, and in urban areas, from 10.7% to 1.1%. 378 million people were lifted from poverty and 171 million from extreme poverty. The main reason, according to the World Bank, is not economic growth but different government welfare programs, like transferring food and money to people with low income, improving their access to services.
Urbanization
Migration from rural to urban areas has been an important dynamic in India’s recent history. The number of people living in urban areas grew by 31.2% between 1991 and 2001. In 2001, over 70% lived in rural areas. The level of urbanization increased further from 27.81% in the 2001 Census to 31.16% in the 2011 Census. The slowing down of the overall population growth rate was due to the sharp decline in the growth rate in rural areas since 1991. In the 2011 census, there were 53 million-plus urban agglomerations in India.
