2025 is being seen as a year in which the National Democratic Alliance (NDA) government, led by Prime Minister Narendra Modi, pushed through a series of reforms aimed at making the Indian economy more resilient amid global uncertainty.
India’s economy grew 8.2% in the second quarter of the year, exceeding estimates, supported by policy changes across taxation, labour, Ministry of Micro, Small and Medium Enterprises (MSMEs), energy, foreign investment, and the legal framework.
GST 2.0
One of the biggest changes was the September rollout of GST 2.0, the most significant overhaul of the Goods and Services Tax (GST) since its launch in 2017. The earlier four-rate structure was replaced with a simpler two-rate system of 5% and 18%, while select items were placed under a 40% slab.
The changes lowered compliance complexity and reduced costs for consumers. Rate rationalisation also supported consumption, with Diwali sales touching ₹6.05 lakh crore. GST revenues in the fiscal year 2025-26 (FY26) are expected to exceed budget estimates.
Income Tax Reform
The Union Budget introduced income tax relief for the middle class by removing tax liability for individuals earning up to ₹12 lakh annually. Alongside this, the old income tax framework, which had over 4,000 amendments, 819 sections, and more than 5 lakh words, was replaced by a new Income Tax Act with 536 sections and about 2.6 lakh words.
Labour Reform
Labour reforms were another key pillar, with 29 laws consolidated into four labour codes. These reforms focused on wages, industrial relations, social security, and workplace safety, while also aiming to improve female workforce participation and reduce unemployment.
A major change allows businesses with fewer than 300 workers to carry out layoffs and closures without prior government approval, compared with the earlier threshold of 100 workers.
MSME Reform
The MSME definition was revised to allow higher investment and turnover limits. For micro enterprises, the investment limit was raised from ₹1 crore to ₹2.5 crore and turnover from ₹5 crore to ₹10 crore.
For medium enterprises, the investment limit increased from ₹50 crore to ₹125 crore, and turnover from ₹250 crore to ₹500 crore. Credit guarantee cover for micro and small enterprises was also raised from ₹5 crore to ₹10 crore.
SHANTI Bill
Parliament passed the SHANTI Bill, or Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India, ending the state monopoly in the nuclear sector. The law allows private and foreign investment in civil nuclear projects and introduces a revised civil liability framework.
Jan Vishwas law
Under the Jan Vishwas law, more than 200 minor offences were decriminalised and several outdated laws were scrapped. The government is preparing a third phase of Jan Vishwas to decriminalise more provisions.
FDI Reform
Foreign direct investment reforms were carried out in 2025, including a new insurance law that permits 100% FDI in insurance companies. The move is expected to attract foreign capital and increase competition in the sector.
Employment Guarantee Law
The Employment Guarantee Law, also called the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission Act Gramin, increased guaranteed workdays for rural households from 100 to 125 days, supporting rural infrastructure and livelihoods.
Legal Reform
Legal reforms were introduced through the Bharatiya Nyaya Sanhita, which replaced the Indian Penal Code of 1860. The new law addresses cyberterrorism, organised crime, economic sabotage, and gender-based violence, while recognising digital evidence, mandating e-FIRs, and setting timelines for trials.
Reducing Regulatory Burden
In addition, the government reviewed quality control orders, removed mandatory compliance for 76 products, and identified more than 200 products for deregulation. This reduced regulatory burden for MSMEs and exporters.
The government has indicated that further reforms aimed at ease of living and ease of doing business will be rolled out gradually from the start of 2026.
