India's Economic Reforms Post-Covid

Economic Growth and Reforms Post-COVID

1. Economic Indicators:

   • India registered a 7.8% growth in Q1 of FY 2025-26.
   • Projected GDP growth for FY 2025-26 is around 7%.
   • Improvement in fiscal discipline highlighted by reduced deficit and debt-to-GDP ratios.

2. Government Expenditure:

   • Shift towards productive capital outlays; capital expenditure as a share of total expenditure increased from 12% in FY 2020-21 to nearly 22% in FY 2024-25.
   • Focus on improving public expenditure quality through enhanced capital outlays.

3. Tax Reforms:

   • Increased the "nil tax" slab to Rs 12 lakh in the Union Budget 2025-26.
   • Standard deduction of Rs 75,000 effectively raises tax-free threshold to Rs 12.75 lakh.
   • Simplified income tax laws to enhance business facilitation and simplify tax compliance.

4. Goods and Services Tax (GST):

   • Recent reforms simplify GST structure with fixed rates of 5% and 18%, increasing consumer disposable income.

5. Labour Laws:

   • Implementation of four labour codes to streamline and simplify existing laws for better labour market efficiency.

6. Banking Sector Reforms:

   • RBI introduced 22 measures to boost banking resilience, credit flow, and ease of doing business.
   • Special focus on internationalisation of the Indian rupee.

7. Trade Agreements:

   • Active negotiations for trade agreements to enhance export competitiveness, notably the India-UK Comprehensive Economic and Trade Agreement (CETA).

8. Private Sector Investment:

   • Economic policies set the stage for private sector investments, rising sharply in sectors like AI, electronics, renewables, electric mobility, petroleum refining, and chemicals in early FY 2025-26.

9. Past Reforms:

   • Continued benefits from earlier reforms such as Insolvency and Bankruptcy Code (IBC), Real Estate (Regulation and Development) Act (RERA), and foreign direct investment (FDI) liberalization.

10. Policy Implementation:

• Emphasis on institutionalizing reforms for effective implementation, as asserted by the Prime Minister during the Independence Day address.

1. Global and Domestic Economic Context:

• India remains resilient amidst global inflation, supply chain disruptions, and tariff uncertainties, marked by low domestic inflation and favorable RBI measures.

Conclusion

The current government term has focused on significant reforms leading to a structural shift in the economy, positioning India for enhanced growth and sustainability. Continual efforts to institutionalize these reforms aim to foster a robust economic environment conducive to private and public investments.