10 CRITICAL MILESTONES FOR INDIA'S REFORM EXPRESS

For India to escape the middle income trap, the recent reform push is just the beginning of a long and arduous journey

- N Madhavan

Free trade agreements can open up new markets for Indian exporters at a time of significant geopolitical churn.

(BLOOMBERG)

On 30 December, Prime Minister Narendra Modi announced that “India has boarded the reform express”. Next generation of reforms unleashed to modernize institutions and simplify governance will add momentum to the growth journey and ensure long term inclusive development, he added.

In fact, 2025 turned out to be the most momentous year when it comes to reforms since the economic liberalization of 1991. Faced with a daunting geopolitical situation and worsening domestic demand, the government decided to remove some impediments. In September, the goods and service tax (GST), India's biggest indirect tax reform introduced in 2017, was restructured to simplify it. Tax rates were slashed to revive demand. The 29 central labour laws have been updated and unified under four codes. It is expected to simplify compliance for business and enhance worker welfare through wage protection, social security, gender equality and workplace safety.

The Income Tax Act, which was complex and outdated causing massive litigation, has been revamped and aligned to the needs of the modern economy. It will come into force from April 2026. The rural job guarantee scheme has been updated, foreign direct investment limits in sectors such as insurance enhanced and the nuclear law tweaked to allow participation from foreign companies. More reforms, such as changes to the Customs Act have been promised.

These changes come at a time when India's economy is enjoying a rare goldilocks period of high economic growth and low inflation. The real gross domestic product (GDP) growth in the second quarter of 2025-26 came in at 8.2% while the consumer price inflation in December was just 1.33%, well below the Reserve Bank of India's lower threshold of 2%.