Economic Reforms of 2025 – Building a Future-Ready India
iasparliament
December 31, 2025
Mains: GS III – Economy
Why in News?
The recent reforms introduced by the government in 2025 represent a significant shift in governance, focusing on delivering measurable outcomes rather than simply expanding regulatory frameworks.
What are the key reforms that is shaping growth and opportunity?
Income Tax Reforms – In 2025, India introduced substantial changes in direct taxation, particularly in the Income Tax Act.
The Union Budget 2025-26 provided major relief to taxpayers by exempting annual incomes up to ₹12 lakh from income tax.
Salaried individuals could benefit from an effective exemption of ₹12.75 lakh due to the standard deduction, which directly boosts disposable income for millions of middle-class households.
Moreover, the introduction of the New Income Tax Act, 2025 simplifies the tax structure and enhances clarity.
This overhaul, which was guided by principles such as textual and structural simplification and minimal changes in tax policy, eliminates obsolete provisions.
The new act consolidates compliance requirements and strengthens digital enforcement, paving the way for a more transparent and efficient taxation system.
Labour Reforms – The labour market in India underwent a major transformation in 2025 with the consolidation of 29 labour laws into four new Labour Codes.
These include the Code on Wages, 2019, Industrial Relations Code, 2020, Code on Social Security, 2020, and Occupational Safety, Health, and Working Conditions Code, 2020.
The reform aimed to enhance both business ease and worker welfare.
These changes focused on streamlining compliance for businesses while offering greater security for workers, including gig and platform workers.
Some significant measures include:
Wages – Uniform definitions of wages and minimum wage standards across all sectors.
Industrial Relations – Simplified processes for trade unions and dispute resolution.
Social Security – Extending social security benefits to gig and platform workers, improving health, maternity, and provident fund provisions.
Workplace Safety – Ensuring safer and more secure working conditions, especially for women and migrant workers.
These reforms aim to create a unified labour framework that serves over 500 million workers and provides a foundation for a future-ready workforce.
Rural Employment Reforms – The Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, replaced the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
This Act introduced several provisions aimed at enhancing rural livelihoods and providing sustainable employment in agriculture and other rural sectors.
Some notable changes include:
Extended Employment Guarantee – Providing 125 days of wage employment per rural household.
Integrated Rural Employment – Ensuring adequate labour during peak agricultural seasons.
Asset Creation – A focus on creating public assets such as rural infrastructure and water security projects.
Decentralized Planning – Allowing local communities to plan their development projects while ensuring integration with national schemes.
By focusing on both employment generation and asset creation, the reforms aim to create long-term economic sustainability for rural India.
Ease of Doing Business Reforms – To boost business growth and attract investment, the Indian Government has undertaken significant reforms aimed at improving the ease of doing business.
The Quality Control Orders (QCOs) were phased in with a focus on MSMEs.
These orders ensure that products meet international standards while providing SMEs with adequate time and support to meet compliance requirements.
Additionally, the government has focused on improving access to finance for MSMEs, including:
Loans linked to external benchmarks with shorter reset periods.
Credit guarantees for MSMEs, covering up to ₹100 crore for equipment and machinery.
Collaterals-free loans for micro and small enterprises.
These measures aim to ensure that businesses, especially MSMEs, can grow without facing unnecessary bureaucratic hurdles.
GST 2.0 Reforms – The Next-Generation GST reforms represent a major overhaul of India's indirect tax system.
These reforms introduce a two-slab GST regime (5% and 18%), simplifying tax classification and compliance.
This system will particularly benefit MSMEs and small traders by reducing tax complexity.
The GST 2.0 reforms also focus on:
Reducing the cost of living – By lowering taxes on essential goods and services.
MSME Enablement – Simplifying GST registration, refunds, and returns for MSMEs and startups.
Revenue Stability – Expanding the tax base, which has grown to over 1.5 crore taxpayers.
By making GST more efficient, the government is aiming to create a tax system that benefits both businesses and consumers.
Export Promotion Mission – To boost India’s global trade competitiveness, the Union Government launched the Export Promotion Mission (EPM).
With an allocation of ₹25,060 crore for FY 2025–26 to FY 2030–31, the mission aims to strengthen India’s export ecosystem by providing financial and non-financial support to MSMEs and first-time exporters.
Key measures include:
Trade Finance – Access to affordable finance for MSMEs.
Market Access – Enhancing the visibility of Indian products in international markets.
Boosting Labour-Intensive Sectors – Supporting sectors like textiles and handicrafts.
The Export Promotion Mission will integrate digital tools and a unified framework to boost exports from underserved districts and sectors.
What are the driving outcomes?
Major push for Indian economy – Collectively, these reforms represent a major push towards a future-ready Indian economy.
Creating a competitive economy – They are designed not only to simplify systems and reduce burdens but also to create a transparent, resilient, and globally competitive economic ecosystem.
Towards 2047 vision – By focusing on inclusivity, digital transformation, and long-term growth, these reforms align with India’s vision for 2047, ensuring that the country is equipped to meet the challenges of a rapidly changing global economy.
What lies ahead?
The economic reforms of 2025 aim to transform India’s economic landscape by addressing key challenges such as tax simplification, labour rights, business compliance, and export competitiveness.
By focusing on outcome-based governance and creating a more inclusive economy, these reforms are laying a strong foundation for sustainable growth and development.
With these initiatives, India is on the path to becoming a future-ready economy that can thrive in an increasingly complex global market.
