The Indian Economy is a developing mixed economy (concept/type) that combines private enterprise with a government-controlled public sector in strategic areas. Its modern structure originated after independence in 1947, when India adopted a policy of centralized planning and protectionism, with the First Five Year Plan beginning in 1952. This initial model, characterized by extensive state intervention and the 'License Raj,' aimed to achieve self-reliance but resulted in slow growth.
The fundamental shift occurred in 1991 when an acute balance of payments crisis forced the adoption of the New Economic Policy (NEP). This policy introduced the LPG model—Liberalisation, Privatisation, and Globalisation—to stabilize the economy and integrate it with the global market. The mechanism works by reducing government control, encouraging private participation, and attracting foreign investment, with nearly 70% of the GDP now driven by domestic consumption.
Key institutions connected to the economy include the Reserve Bank of India (RBI), which regulates the financial sector, and the NITI Aayog, which replaced the Planning Commission in 2015. Significant recent changes include the implementation of the Goods and Services Tax (GST) in 2017, which unified the indirect tax system. Furthermore, the introduction of four labour codes on November 21, 2025, is considered a major structural reform since 1991, streamlining compliance for 63 million enterprises.