On board the reform express: 10 milestones India must hit

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 geo-political 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The Income Tax Act, which was complex and outdated causing massive litigation, has been revamped and aligned to the needs of the modern economy.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%.

As per the first advance estimates, India’s real GDP is expected to expand by 7.4% in 2025-26 as against 6.5% in 2024-25 despite significant challenges on the geopolitical front.

But not all experts are gung-ho. To maintain its rapid economic growth, India needs more changes but the nation’s reforms history worries them. Policy makers, when pushed to a corner, embark on big bang reforms and then typically take their feet off the pedal. Worse, going forward, much of the pending work such as land, judicial, education and agricultural reforms need support from the states—not an easy challenge to overcome in the country’s federal structure and fragmented polity. The Reform Express, therefore, has an uphill journey.

While India remains the fastest growing large economy in the world, this enviable performance masks weaknesses. One, this growth is not uniform. It is powered largely by government spending and its benefits don’t reach the population uniformly. Other engines of growth—private investment, domestic consumption and exports—need to fire on all cylinders if India has to grow consistently at over 7% every year to escape the middle income trap and become a rich nation by 2047. The window to achieve this is short—the next 33 years—before India’s demographic dividend ends and the nation risks aging before it gets rich.

But, the external environment has turned adverse. Unlike Japan, South Korea and China, India cannot export its way to riches. Anti-globalization has taken root.

“When other Asian economies were growing, the world was opening up fast. Now, it has turned insular and protectionist. We need a different playbook," D. K. Joshi, chief economist at Crisil, said. “Reforms can trigger a virtuous cycle of growth and investment."

“As an emerging economy, the need for reforms was always there but it has become urgent now thanks to the new global order," agreed Madhavi Arora, chief economist, Emkay Global Financial Services.

Policy makers have come to realise that reforms are needed to reduce regulation and consequently the compliance cost to make domestic manufacturing competitive. Doing so will revive private investment, reverse sell-off by foreign portfolio investors who, under current circumstances, find Indian stocks overvalued, enhance foreign direct investment and accelerate exports. Reforms are also needed because the government has possibly reached its limit when it comes to powering economic growth through public spending and resorting to tax cuts.

“The era of executing reforms in fits and starts is over. It now needs to be a continuous process and sequenced perfectly," said Suresh Babu, director, Madras Institute of Development Studies. “Doing big bang reforms in spurts will only create fatigue."

Mint spoke to a cross-section of economists to identify 10 important reforms that are needed for the Reform Express to reach its destination of Viskshit Bharat.

Land reforms

Transactions involving land involve multiple authorities, opaque processes, stamp duty rates that are high and vary across states. The system is also prone to litigation. These factors hurt the ease of doing business for investors who look for large parcels of lands to locate their manufacturing facilities. Lack of political will, bureaucratic obstacles and different laws in different states make reforms difficult. Political consensus across states and across the political divide is critical. The Confederation of Indian Industry (CII), an industry lobby body, has suggested a GST Council like structure for co-ordinated and consensus based land reforms. If done right, land reforms could unlock rural development, drive inclusive growth, revive agri productivity, manufacturing and investor confidence.

Agricultural reforms

If Indian agriculture is inefficient and unremunerative, it is because of primitive agricultural practices and poor market access. These have hurt agricultural productivity, reduced farmer income, impaired India’s efforts to address food security and tackle rural distress. Add mis-directed subsidies to the mix—they have become fiscally costly and distorted the market. In September 2020, the Modi government passed farm laws which sought to de-regularize the sector and tackle various shortcomings. But protests broke out. Lack of political consensus forced the government to withdraw the laws in November 2021. India is back to square one.

Judicial reforms

Foreign investors fear lack of efficient dispute resolution. There are significant backlogs in courts and tribunals which suffer from poor infrastructure and inadequate number of judges. The alternate dispute redressal system is weak. All these increase legal costs and uncertainty. According to the International Monetary Fund, this inefficiency costs India 0.28% in GDP growth annually. Here again, the Centre and the states have to work together as the supreme court and the high courts come under the Centre’s ambit while administration of justice in lower courts is within the purview of the states.

Insolvency law reforms

The Insolvency and Bankruptcy Code (IBC) enacted in 2016 revolutionized debt resolution in India like never before. It boosted the creditor’s recovery, improved the ease of doing business, and increased investor confidence. Apart from bringing about a time bound debt resolution through a systematic process, it was an effective deterrent against unscrupulous borrowers. In the nine years, as per a Crisil Ratings study, bad debts worth ₹26 trillion were resolved. But IBC has its shortcomings. The process suffers significant delays and is seen as costly by small businesses. Also, lenders are forced to take high hair cuts and the code is ineffective in handling cross-border insolvency. The IBC Amendment Bill 2025 seeks to address some of these challenges.

Educational reforms

In 2020, the Modi government introduced the National Education Policy (NEP). It sought to bridge the learning gap, improve quality of education, make learning accessible and flexible, introduce interdisciplinary learning with a clear focus on research and innovation. Five years on, NEP, which is considered to be a good blueprint, has only had a marginal impact on the ground in terms of enrollment and learning outcomes. Experts attribute this to implementation challenges. Government spending on education is low and the quality of teachers needs to improve. Lack of political consensus means NEP benefits are not uniform across the country. The government is planning a new law to reform higher education. Without these reforms, India’s demographic dividend could go waste, experts warn.

Healthcare reforms

In India, healthcare is a fundamental right but quality healthcare still eludes millions. The system is plagued by shortage of hospital beds, nurses and doctors. Years of chronic under-investment is the reason. Public investment in healthcare is a low 1.2% of GDP. In recent years, the government, through its Ayushman Bharat schemes, increased universal health coverage. Nonetheless, there is an urgent need to boost public spending to 3% to 5% levels. This is all the more critical as incidences of non-communicable illness, such as diabetes and cardio-vascular diseases, are on the rise.

Labour reforms

This is another bug bear that scares investors, both domestic and foreign. There were as many as 29 different laws that governed labour at just the central level. Add state level laws to the mix. The central government has recently consolidated its laws into four labour codes. These codes not only simplify the laws and improve the ease of doing business, they also expand wage/social security and workplace safety. However, there is work left to make the codes operational. This involves finalising and notifying rules. As labour is a concurrent subject, these rules must align with those in the states for them to be effective.

Trade barriers

As India’s external environment becomes challenging, it becomes important to reduce trade barriers to help domestic manufacturers enhance their competitiveness. The government has made a beginning. Recently, it has withdrawn over 70 quality control orders on intermediate goods and raw materials, which also act as a non-tariff barrier, after expert committees recommended the same. They will go a long way in making Indian goods competitive. However, not all recommendations have been implemented. Domestic industries’ fear of flooding—of predatorily priced imports from countries like China—can be tackled through anti-dumping measures. Meanwhile, free trade agreements can open up new markets for India’s exports. In 2025, three agreements were struck—with the UK, Oman and New Zealand. One agreement with the European Union is in the final stages of negotiation.

Fiscal consolidation

Domestic cost of borrowing for Indian firms is at least 400 basis points more compared to companies in other countries. The only way to reduce this cost? A laser focus on fiscal consolidation, experts said. The Fiscal Responsibility and Budget Management Act originally envisaged reducing the central government’s fiscal deficit to 3% of GDP by 2008. This target was never met for reasons both within and beyond the control of the government. High fiscal deficit means the government is also in the market to borrow to meet its revenue shortfall. By doing so, it crowds out the private sector and causes the interest rate to rise. Post the covid-19 pandemic, the central government has done well to bring down the fiscal deficit sharply. Still, the combined deficit of the centre and states remains high. From 2026-27, the central government will move away from fixing the fiscal deficit and focus on reducing its debt as a share of GDP instead. It should lay out a clear road map to reduce its debt from the current level of 57% of GDP to less than 50% by March 2031.

Deregulation

These reforms apart, there is a need to reduce regulations across all departments. Last year’s Economic Survey focussed on the same. Tighter regulation suffocates the industry and increases compliance costs, especially for smaller businesses. Governments, both at the centre and states, need to simplify them on a mission mode, experts suggested. Doing so could enhance not just the ease but the speed of doing business.