2025 Economic Reforms: Building a Future-Ready India

Why in News ?

In 2025, the Government of India undertook a wide-ranging set of economic reforms aimed at simplifying governance, reducing compliance burden, and strengthening inclusive growth. These reforms span income tax restructuring, labour codes, GST 2.0, rural employment guarantees, MSME support, export promotion, and ease of doing business measures—marking a decisive shift towards outcome-driven and citizen-centric economic governance.

Background & Context

India’s economic reforms in 2025 represent a transition from regulatory expansion to delivery-focused governance. Building on structural reforms of the past decade—such as GST, Insolvency and Bankruptcy Code (IBC), and Digital Public Infrastructure—the focus in 2025 moved towards:

• Simplifying legal and tax frameworks
• Reducing friction in everyday economic activity
• Enhancing predictability and trust in policy
• Strengthening employment, exports, and MSMEs

The reform agenda aligns with the long-term national vision of Viksit Bharat @2047, emphasizing productivity-led growth, inclusivity, and resilience.

Key Economic Reforms in 2025

1. Income Tax Reforms

Major Highlights

• Tax exemption up to ₹12 lakh under the new tax regime
• Effective exemption of ₹12.75 lakh for salaried taxpayers due to standard deduction
• Increased disposable income for the middle class, boosting consumption and savings

New Income Tax Act, 2025

Replacing the Income-tax Act, 1961, the new law is guided by three principles:

• Simplification of language and structure
• No major change in tax rates or policy
• Continuity and certainty for taxpayers

Key Structural Reforms

• Introduction of a single “Tax Year”, replacing Assessment Year and Previous Year
• Consolidation of compliance provisions (e.g., TDS under a single section)
• Strengthened faceless assessment and digital-first enforcement
• Improved dispute resolution mechanisms

Significance: The Act reduces litigation, enhances clarity, and modernizes India’s direct tax architecture for a digital economy.

2. Labour Reforms: Four Labour Codes

The Government consolidated 29 labour laws into four Labour Codes, covering over 50 crore workers:

1. Code on Wages (2019)
   1. Uniform definition of wages
   2. Statutory minimum wages across sectors
2. Industrial Relations Code (2020)
   1. Simplifies trade union regulations
   2. Streamlines dispute resolution
3. Code on Social Security (2020)
   1. Extends social security to gig, platform, and unorganised workers
   2. Covers health, maternity, life, and provident fund benefits
4. Occupational Safety, Health & Working Conditions Code (2020)
   1. Improves workplace safety
   2. Reduces multiplicity of inspections

Impact

• Nearly 10 million gig and platform workers covered annually
• Enhanced maternity benefits and safety provisions for women
• Shift from rule-based to outcome-based labour governance

3. Rural Employment Reforms

Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025

Replacing MGNREGA, the new framework integrates employment with rural development.

Key Features

• 125 days of guaranteed wage employment per rural household
• Weekly wage payments (maximum 15-day delay)
• Focus on durable asset creation:
  • Water security
  • Rural infrastructure
  • Climate-resilient projects
  • Livelihood enhancement
• Decentralised planning via Viksit Gram Panchayat Plans (VGPPs)
• Digital integration with PM Gati Shakti
• Administrative expenditure cap raised from 6% to 9%

Significance: Enhances livelihood security while strengthening rural infrastructure and agricultural productivity.

4. Ease of Doing Business Reforms

Quality Control Orders (QCOs)

To protect MSMEs from compliance shocks:

• Extended compliance timelines:
  • Micro enterprises: 6 months
  • Small enterprises: 3 months
• Exemptions for:
  • Export-oriented units
  • R&D imports (up to 200 units)
  • Legacy stock clearance

BIS Support for MSMEs

• Reduced marking fees
• Optional in-house labs
• Shared access to accredited labs
• Transparent product certification guidelines

5. MSME Reforms

Revised MSME Definition (Budget 2025–26)

Credit Support

• Credit guarantee doubled from ₹5 crore to ₹10 crore
• MCGS-MSME coverage up to ₹100 crore
• Collateral-free loans up to ₹10 lakh
• Improved access to working capital

6. GST 2.0 (Next-Generation GST Reforms)

Key Changes

• Two-slab structure: 5% and 18%
• Reduced classification disputes
• Faster refunds and simplified returns

Impact

• GST taxpayer base expanded to 1.5 crore
• Gross collections reached ₹22.08 lakh crore (FY 2024–25)
• Lower cost of living due to rate cuts on essentials

Significance: Strengthens GST as a citizen-centric, growth-oriented tax system.

7. Export Promotion Mission (EPM)

Outlay: ₹25,060 crore (2025–26 to 2030–31)

Objectives

• Affordable trade finance (Niryat Protsahan)
• Compliance, branding, logistics & market access (Niryat Disha)
• Focus on MSMEs, first-time exporters, and non-traditional districts

Expected Outcomes

• Export diversification
• Employment generation
• Enhanced global competitiveness

Other Trade & Business Reforms

• Digital integration via:
  • National Single Window
  • ICEGATE
  • Trade Connect
  • e-Commerce Export Hubs
• District Business Reform Action Plan (D-BRAP 2025)
• ₹58,000 crore disbursed under RoDTEP (till March 2025)
• Enhanced MSME participation in GeM procurement

Analysis: Why These Reforms Matter

• Shift from input-based regulation to outcome-based governance
• Reduced compliance costs and legal uncertainty
• Strong focus on jobs, MSMEs, exports, and rural livelihoods
• Reinforces cooperative federalism (GST, labour, rural employment)
• Strengthens trust in institutions and policy stability

Way Forward

• Timely implementation of Labour Codes across States
• Strengthening grievance redressal under GST 2.0
• Capacity-building at Panchayat and MSME levels
• Continuous monitoring to ensure inclusion and last-mile delivery