The Licence Raj or Permit Raj (rāj, meaning "rule" in Hindi) is a term coined by Indian independence activist and statesman C. Rajagopalachari for the system of strict government control and regulation of the Indian economy. This economic system, a form of state capitalism, was in place from the 1950s to the early 1990s. Under this system, businesses in India were required to obtain licences from the government in order to operate, and these licences were often difficult to obtain.

The Licence Raj was intended to protect Indian industry, promote self-reliance and ensure regional equality. Up to 80 government agencies had to be satisfied before private companies could produce something and, if granted, the government would regulate production.

The term "Licence Raj" is a play on the "British Raj" which refers to the period of British rule in India. Chakravarti Rajagopalachari’s criticism of the License Raj stemmed from his opposition to the system of strict government control and regulation of the economy. Rajagopalachari believed that the Licence Raj had the potential for political corruption and economic stagnation, and founded the Swatantra Party to oppose these practices.

Reforms started in 1991 have significantly reduced regulation. However, Indian labour laws continue to protect workers in the formal sector from being laid off by employers and place significant restrictions on the ability of businesses to reduce their workforce without incurring significant costs and burdens. This is viewed by some as a barrier to economic growth and development as it may create a disincentive for businesses to hire workers and can make it difficult for them to respond to changing market conditions or economic challenges. It is also to be noted that a majority of Indian workers are employed in the informal sector, where many of the labour protections do not apply.

Following the Russian Revolution, socialist thinkers in India began drawing parallels between the pre-revolution Russian proletariat and the Indian masses under colonial rule, seeing socialism as a way to empower poor Indian farmers. Following Indian independence these socialist factions, most importantly Jawaharlal Nehru's conception of democratic socialism, influenced the policies of the Licence Raj.

Nehru studied at Trinity College, Cambridge and was exposed to socialist ideas during his time there. He also visited the Soviet Union in 1927, and this experience may have further influenced his views on socialism. However, Nehru's own political views and the policies he implemented as Prime Minister were often more pragmatic and centrist than strictly socialist. He believed in the need for a strong, centralised government and a planned economy, but he also recognised the importance of private enterprise and the market in driving economic growth and development. Nehru also believed that protecting domestic industries would help to promote industrialisation and economic development in India, and he implemented a number of protectionist policies during his time in office.

He saw such government intervention as a way to modernise the Indian economy which had been left impoverished by decades of colonial rule. However, Nehru did not seek to eliminate the private sector entirely, as was the case in the Soviet Union. Rather, he pursued a policy of creating a mixed economy in India, with strategic industries under state control and public sector corporations guiding investment, while also allowing for a significant role for the private sector and market forces.

The economic centralisation and controls required for the war effort during World War II helped create the bureaucratic and manufacturing infrastructure necessary to institute Nehru's plans, and so following independence and his election as prime minister, he had the opportunity to put his ideas into action. In his speech to the Constituent Assembly of India, he declared, "The service of India means the service of the millions who suffer. It means the ending of poverty and ignorance and disease and inequality of opportunity."