More reforms lined up in FY27 Budget to deregulate industries, decriminalise laws

More reforms coming in FY27 Budget to deregulate industries

With the Union budget of fiscal year 2027 (FY27)—finance minister Nirmala Sitharaman’s ninth—set to be announced soon, India’s governance engine is revving up to add more muscle to the slew of reforms initiated in FY26.

The two keywords for the coming budget—de-regulation and de-criminalisation—are being impressed upon all who matter within the government in an effort to make the budget a blueprint for faster economic growth over the medium term, according to two persons informed about developments within the government.

The first person cited above said that every ministry and department has been instructed to give proposals for deregulation and decriminalization of laws, rules and procedures. “These are being reviewed and refined at high levels in the government every 10 days," this person said, requesting anonymity.

The second person said that the government will also move to amend two laws in the budget session of Parliament. Amendments to the Companies Act 2013 will seek to improve ease of doing business, while amendments to the Insolvency and Bankruptcy Code (IBC) will seek to make debt resolution faster and more efficient.

The first person added that in 2026-27, the government will seek to accomplish reforms across sectors seeking to boost productivity. “This goal has been outlined in this year’s Economic Survey," said the person.

The Economic Survey 2024-25 noted that India needs to grow at around 8% at constant prices for a decade or two to become an advanced nation by 2047, and that enhancing economic freedom for individuals and small businesses is a key medium-term policy priority.

“Old rules and regulations that are no longer relevant can be either dropped or reformed," said D.K. Srivastava, EY India’s chief policy advisor. “These changes are aimed at improving the administrative and economic efficiency in the system, which will have a beneficial impact. The impact is likely to be more in the medium term."

Queries emailed to the finance ministry on Friday seeking comments for the story remained unanswered.

What else will change

A second highlight of the FY27 Union budget will be that macro ratios such as debt-to-GDP ratio or tax-to-GDP ratio will change after the budget presentation as the statistics ministry will introduce a new GDP series with base year 2022-23 on 7 February. “While the budget figures in absolute numbers will remain unaffected, the ratios can be reworked once the new GDP estimate is available," said the first person.

FY26 budget documents showed that the government will target a debt to GDP ratio of 50% by FY31 from 56.1% in FY26. Between FY27 and FY31, the government will have to reduce debt in terms of 1.22 percentage points each year.

What industry wants

Meanwhile, industry bodies have pressed for reforms in the power sector, including stopping the practice of the industrial sector subsidizing consumer power tariffs, and enabling greater private participation in power distribution.

Measures to build domestic manufacturing capacity for import-dependent products, deeper integration with global supply chains, expanded disinvestment in state-run companies to fund public capital expenditure, and composite licences for exploration and mining are among the wish list shared by Confederation of Indian Industry (CII).

What’s changed, what’s coming

This year, the government has cut income tax rates and simplified the Income Tax law, liberalized foreign ownership in the insurance sector, opened up the nuclear power sector and notified new labour codes. GST Council has simplified the indirect tax system. The next big reform, as indicated by Sitharaman, will be in customs.

On Tuesday, Prime Minister Narendra Modi discussed the FY27 budget priorities with Sitharaman, NITI Aayog vice chairman Suman Bery, and chief economic advisor V. Anantha Nageswaran, among others. Sitharaman is likely to meet state finance ministers sometime in the first half of January to seek inputs for the budget.

At the meeting, Modi stressed the need for mission-mode reforms to build global capabilities and deepen integration with international markets, an official statement said, adding that policymaking and budgeting must remain anchored to India’s vision for 2047. He also spoke about the need for ensuring that the nation remains a vital hub for the global workforce.

Economists at the meeting underlined the importance of boosting productivity and competitiveness across manufacturing and services, noting that consolidating reforms undertaken in 2025 would help India remain among the world’s fastest-growing economies.

In a social media post on Tuesday, Modi said: “India has boarded the Reform Express! 2025 witnessed pathbreaking reforms across various sectors which have added momentum to our growth journey. They will also enhance our efforts to build a Viksit Bharat."

He cited income tax and GST relief, reforms in insurance and capital markets, labour codes, and free trade agreements with New Zealand, Oman and Britain as key elements of the reform push.