Abstract. Up to the beginning of 1990s, the development model of India has exhausted its potential for further growth. This sense of exhaustion strengthened the ruling elites’ consciousness to the need of a “paradigm shift”. In the history of Indian statehood one can distinguish a few attempts of socio-economic reforms. Nonetheless, all these projects were postponed for domestic political reasons. The investigation of social processes in India’s economic and political spheres should be dealt with on a complementarity basis. Since the beginning of 1980s, the centralized administration was not delivering economic goods. Federal institutional framework that emerged after the independence should have been modified in accordance with new realities. The 1991 economic reform has increased a resilience of a political system. Over the last 25 years, India has become one of the leading players in a world arena, demonstrating impressive economic growth. At the same time, the country is still suffering from poverty and regional disparities. As emphasized in official government statements, the aim of reforms was not only in reviving Indian economy, but also in “combining sustainable economic growth with equity and social justice”. To implement social obligations, it is needful to ensure larger scale cooperation between states as well as between the latter and the federal centre, to reactivate the development potential of local self-government institutions. To promote a cooperative federalism in the beginning of 2015, the Government of India has taken a decision to establish a new institution named NITI (National Institution for Transforming India) Aayog in place of the Planning Commission. New global trends and internal needs set a task of improving the viability of the development strategy. This may involve new reforms. The article examines the changes in socio-political development of the country after economic reforms and analyzes challenges for further progress.