Factor market reforms could set the stage for India’s next big leap

Bold moves on land, power and capital would enable the country to emerge as a globally competitive manufacturing hub

- ANANT GOENKA

India’s strong GDP performance, kept up even in a period of global uncertainty, reflects structural strength built through consistent policy reform.

As India moves towards becoming the world’s third-largest economy, the key challenge is not the pace of growth, but ensuring that this momentum is sustainable, productivity-driven and inclusive. In this context, the next major frontier for India’s economic transformation lies in accelerating factor market reforms.

Significant progress has already been achieved. The implementation of GST 2.0 marks a major milestone in India’s indirect tax architecture. Rationalization of slabs, correction of inverted duty regimes and simplified technology-enabled compliance are reducing friction for businesses and stimulating consumption. Over time, if the GST Council considers bringing fuel products under the GST regime, it would represent a structural inflection point that dramatically lowers logistical costs and improves India’s export competitiveness.

Similarly, the notification of four labour codes represents a decisive step toward modernizing India’s labour market. The consolidation of 29 laws into a coherent framework simplifies compliance, promotes formalization, introduces a unified definition of wages and strengthens worker protection. Widespread implementation across states, ideally in a time-bound manner, will determine the extent to which India can unlock the full potential of labour reforms.

With labour and tax reforms advancing, the next phase of economic stewardship must focus on the core factors of production—land, power and capital—that determine the economy's long-term trajectory of growth.