It’s more of a “bring the whole tribe together” affair, but only makes sense in villages when food and labor was cheap. But that was within the grandparents’ and parents’ lifetimes so it still lingers around, only now it’s a status symbol to show how well you’ve made it, and of course, some (most?) people choose to over extend themselves and choose to show off to the tribe rather than invest in their own future. Especially since the “tribe” is further and further away from the original rural villages which were geographically next to each other.
The new tribes are split along educational and wealth boundaries, so anyone who thinks wasting money entertaining the tribe will help keep them in it is sorely mistaken.
And it's not just you inviting people, but your parents and their parents.
It's not uncommon to actually not know 2/3s of the people at your wedding.
The best part however is that each guest will give you a "red envelope" of money. It's basically the wedding gift. The more people you invite, the more money you can possibly make (even after the expenses of the wedding).
This money is then used for the new coupe to start their family.
For distant relatives no gift is expected, but people do give cash(1000rs avg). For close relatives it's mostly gold. You are supposed to return equal or more than you received for your sons/daughters marriage. It can average 8gms of 22k gold (cost upto 30000rs) which is not a small amount.
Also all of these varies between states, religions and caste. For e.g no one expects dowry in West Bengal while in neighbouring state you are expected to give hefty dowries.
My father in law has lived all his life in the same city. Has a lot of friends, acquaintances, and relatives. Inviting them to the wedding becomes a social compulsion in such cases.
Indian weddings are strange in that the bride and groom hardly matter. It's essentially an event hosted by their parents.
Trying to get my parents to back down from a big wedding was a futile exercise as well. For them, it was a matter of "shame" if they couldn't host a large wedding