In 2025, India rolled out major economic reforms that boosted growth, strengthened exports, and attracted investment. The Union Budget 2025‑26 focused on Agriculture, MSMEs, Investment, and Exports while keeping the fiscal deficit under 4.4% of GDP. These measures provided a clear roadmap for long-term growth, helping the economy rebound from 5.4% GDP growth in Q2FY25 to 8% in Q2FY26.
Tax Reforms Boosted Consumption
- Income up to ₹12 lakh (₹12.75 lakh for salaried employees) was exempted, reducing household tax burdens.
- GST rates were simplified to 5% and 18%, with luxury goods at 40%, making essentials, durables, and building materials more affordable.
- Higher disposable income led to increased spending, particularly in consumer-driven sectors, supporting domestic demand and economic growth.
Agriculture and Rural Economy Strengthened
- Dhan‑Dhaanya Krishi Yojana targeted 100 low-productivity districts, benefitting 1.7 crore farmers.
- Higher Kisan Credit Card limits improved rural cash flow.
- Programs in pulses, fruits, vegetables, high-yield seeds, and fisheries boosted output.
- Rural skilling initiatives reduced under-employment, stabilising rural demand and improving agri-supply chains.
- These steps attracted investment in agribusiness and related sectors.
MSMEs and Startups Got Support
- MSME classification thresholds were raised, allowing firms to grow while retaining benefits.
- 1 million micro-enterprise credit cards were issued.
- A ₹10,000‑crore Fund of Funds supported startups.
- Targeted schemes for SC/ST and women entrepreneurs widened participation.
- This enhanced liquidity and growth potential in the small business sector, contributing to higher GDP growth.
Infrastructure and Human Capital Investments
- PPP pipelines and ₹1.5 lakh‑crore interest-free loans to states accelerated development.
- 50,000 Atal Tinkering Labs, expanded IIT capacity, AI centres, and 10,000 new medical seats strengthened innovation and healthcare.
- These measures built long-term capacity and improved India’s competitiveness.
Exports and Trade Integration Expanded
- BharatTradeNet simplified export procedures.
- Free trade agreements with Europe and the Middle East diversified markets.
- Higher FDI limits and improved rural credit scoring encouraged foreign investment.
- These reforms boosted export growth and foreign capital inflows, supporting the GDP jump.
Conclusion
India’s GDP growth from 5.4% in Q2FY25 to 8% in Q2FY26 reflects the combined impact of tax relief, GST rationalisation, rural and MSME support, infrastructure development, and trade reforms. For investors, these reforms offered clarity, predictability, and long-term opportunities, making India a stronger and more attractive market for capital.
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