Step 1: Understanding party systems.
A party system refers to the number and type of political parties that compete in elections and share power.
Step 2: Indian political structure.
India has many political parties at national and state levels. Several parties contest elections and form coalition governments. Hence, India follows a multi-party system.
Step 3: Analysis of the options.
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(A) One-party system: Incorrect. Multiple parties exist.
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(B) National party system: Incorrect. Both national and regional parties exist.
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(C) Two-party system: Incorrect. More than two major parties compete.
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(D) Multi-party system: Correct. India follows this system.
Step 4: Conclusion.
Therefore, Indian democracy follows a multi-party system.
Final Answer:} Multi-party system.