The 2025 reforms were not only ambitious but also urgently needed, coming at a time when global trade tensions and economic uncertainties were reshaping international markets.
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With rising protectionism, supply chain disruptions and competition for foreign investment, India faced the challenge of making its economy more efficient, resilient and appealing to both domestic and international investors.
The income-tax relief and GST restructuring helped strengthen domestic demand, while labour reforms and FDI liberalisation made the business environment more competitive. Energy and financial sector reforms unlocked untapped potential and aimed at attracting global partnerships, ensuring that India could navigate external shocks more effectively. By acting decisively, the government positioned the economy to withstand global volatility, seize new opportunities and assert itself as a stable and attractive hub for investment in an increasingly uncertain world.
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Boosting consumption through tax relief
The reform journey began with a significant overhaul of the income-tax structure in the Union Budget early in 2025. By providing substantial relief to taxpayers at the lower end of the income spectrum, the government aimed to increase disposable income and stimulate domestic consumption. This step not only enhanced purchasing power but also addressed longstanding concerns about inequity in the tax system.
By incentivising spending among lower- and middle-income households, the government sought to create a ripple effect across sectors dependent on consumer demand, from retail to manufacturing, effectively jumpstarting economic activity in the post-pandemic era.
Reimagining Goods and Services Tax (GST)
Following tax relief measures, the government embarked on a radical restructuring of the Goods and Services Tax (GST). This reform simplified compliance, reduced cascading taxes and aimed to make the indirect tax system more efficient and transparent.
By lowering bureaucratic hurdles and easing the burden on businesses, especially small and medium enterprises, the GST reform encouraged entrepreneurship and investment. The streamlined GST framework also showed India’s commitment to creating a business-friendly environment that could compete globally, thereby enhancing its attractiveness to domestic and foreign investors alike.
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Strengthening manufacturing and worker security
Another cornerstone of 2025’s reform agenda was the implementation of comprehensive labour codes. Long pending, these reforms modernised labour laws, balancing the dual objectives of boosting India’s manufacturing potential and providing greater protection for workers.
By simplifying regulations, consolidating outdated legislation and improving worker benefits, the government created a framework that could facilitate faster industrial growth without compromising social security. These labour reforms are likely to enhance India’s appeal as a manufacturing hub in the global supply chain, especially in sectors where flexible labour policies are crucial.
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Attracting foreign investment
To further energise capital markets and improve sectoral efficiency, the government approved 100% foreign direct investment in the insurance sector. This move is expected to attract global insurance players, increase competition and introduce innovative financial products.
Greater foreign participation not only strengthens the sector’s capital base but also enhances financial literacy and insurance penetration across the country. In the long run, a more robust insurance sector will support economic stability, risk management and entrepreneurship, forming a crucial pillar for sustainable growth.
Tapping hidden energy potential
In a bid to tap India’s underutilised energy potential, Parliament passed the “Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill.” By encouraging private investment and international partnerships in the nuclear sector, the legislation aims to diversify India’s energy mix, reduce dependence on fossil fuels, and foster innovation in clean energy technologies. The SHANTI Bill represents a forward-looking approach to energy security, positioning India to meet its growing energy demands while supporting climate action objectives.
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Modernising financial markets
The Securities Markets Code Bill, presented in Parliament, reflects the government’s focus on making India’s financial markets more efficient, transparent and investor-friendly. By consolidating existing laws, reducing regulatory redundancies and enhancing governance mechanisms, the bill aims to improve market integrity and liquidity.
A modernised financial market ecosystem not only attracts domestic and foreign investment but also strengthens the foundations of a knowledge-driven economy, supporting startups, innovation, and long-term capital formation.
Social welfare with an edge
Finally, the government replaced the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) with the VB G-RAM-G scheme, enhancing India’s job guarantee framework. This reform modernised employment schemes to be more targeted, efficient and aligned with contemporary rural development needs. By improving the delivery of social welfare and integrating skill development with employment opportunities, VB G-RAM-G aims to provide sustainable livelihoods, reduce poverty, and promote economic participation in rural India.
Collectively, the reforms of 2025 signify a quick turn towards a more dynamic, efficient and inclusive Indian economy. By boosting consumption, simplifying taxation, modernising labour laws, attracting foreign investment, unlocking energy potential and improving financial markets, the government created a multi-dimensional approach to growth. Moreover, by reforming social welfare schemes, it ensured that economic progress is equitable and inclusive. These measures not only enhance India’s global competitiveness but also lay the foundation for sustained economic resilience, showing a decisive step towards realising the country’s untapped potential. In retrospect, 2025 will be remembered as a year of transformative action, where bold policy choices redefined the trajectory of India’s economic future when global trade tension and domestic demand slack threatened the economy.