When it comes to its economy, India is divided into two worlds.

One is rooted in its cities. Here enterprises trade on global markets, operate through banks and pay taxes. This more modern economy is made up of family owned and publicly listed companies. It’s where almost all of India’s new wealth has been generated in recent years.

Then there’s the vast informal economy, which sustains as many as nine of every 10 Indians who work and accounts for almost half the country’s economic activity. The informal economy is largely rural and comprises day-laborers, one-man shops and roadside haircutters. They operate in cash and pay no taxes.

A critical goal for India has been to enlarge the more-modern economy and shrink the informal one, but now progress is stalling. A deepening economic slump that started in the informal economy is hitting the more-developed parts hardest.

Whether India manages the economic transition matters far beyond its shores. It is projected to become the world’s most populous country in 2024 and by then will also likely be the fifth-largest economy. With China increasingly closing itself off to foreign firms or being shunned by them in the trade war, India has emerged as the last huge growth market for companies ranging from digital trailblazer Amazon.com Inc. to old-line oil giant Aramco.