Recent simplification of the GST regime is seen as politically influenced but also economically necessary. The reforms took 18 months of Centre–state deliberations, reflecting systemic delays.

• The Rate cuts are expected to trigger demand and propel growth, but impact is uncertain.

Impact of GST Reforms

• Revenue Loss to Government: The government will lose about ₹48,000 crore due to the GST cuts, effectively shifting resources from the public to the private sector.
• Stimulus for a Large Economy: This transfer is expected to stimulate demand within India’s ₹330 lakh crore economy.
• Unclear Budgetary Effects: The tax reliefs of Budget 2025 have not yet demonstrated a clear impact on consumption and economic momentum.

Export Competitiveness under Strain

• Tariff Burden on Indian Exports: Indian goods worth $48–60 billion face tariffs of up to 50 percent in the US market.
• Employment-Heavy Sectors at Risk: Textiles and gems & jewellery, which employ over 50 million workers across hubs like Tiruppur, Noida, and Surat, are severely affected.
• Comparative Disadvantage: Indian exports are becoming less competitive compared to Vietnam, Sri Lanka, and Bangladesh due to these tariff challenges.

Fiscal Space and Resource Mobilisation 

• Limited Fiscal Headroom: Fiscal deficit targets of 4.4 percent and India’s S&P ratings upgrade constrain government spending flexibility.
• Asset Monetisation Agenda: NITI Aayog earlier identified ₹6 lakh crore worth of projects for monetisation, but results remain undisclosed.
  • The 2025 Budget raised the monetisation target to ₹10 lakh crore, requiring transparency and clear deadlines.
• Untapped Disinvestment Potential: India continues to act as a massive business house due to its extensive PSU holdings, highlighting the need for bold disinvestment.

Amrit Kaal / Bharat Fund Proposal

• Valuation of State Holdings: The market value of listed PSUs is ₹34.33 lakh crore, while listed PSU banks add another ₹15.9 lakh crore.
• High Government Shareholding: Many undertakings such as LIC, GIC, RVNL, IRFC, and public banks still have government stakes above 80 percent.
• Creation of Sovereign Fund: A proposal suggests parking stakes above 51 percent into a sovereign “Amrit Kaal Fund” or “Bharat Fund.”
  • Such a fund could unlock valuations and raise significant resources for development financing.

Structural and Regulatory Bottlenecks

• Archaic Legal Framework: India’s economy remains constrained by outdated laws, systemic inefficiencies, and regulatory cholesterol.
• GST’s Unfinished Agenda: The GST regime continues to struggle with cess, inverted duties, complex classifications, and heavy compliance burdens
• Criminalisation of Business Laws: Out of 1,843 laws governing businesses, more than 800 carry imprisonment provisions, deterring enterprise.
• Pending Decriminalisation Reforms: The government’s promise to ease punitive laws has not yet translated into actionable reforms
• Lack of Global Branding: Indian corporates have failed to match the scale and global recognition of brands like Samsung, Toyota, or Sony.
• Weak Investment in Innovation: Insufficient investment in R&D is a major reason behind India’s weak global competitiveness.
  • The ₹20,000 crore allocated for private sector R&D remains undistributed.
• Struggling Export Diversification: The “One District, One Product” scheme, aimed at promoting diversification, is floundering in execution.
• Idle Labour Welfare Funds:: Rapid technological changes are altering livelihoods, necessitating large-scale skilling and reskilling.
  
  • India requires a strong public–private model to launch a nationwide skilling and reskilling revolution.
    • Despite urgent needs, ₹70,000 crore allocated for labour welfare is lying unutilised.

Way Forward

• Expansion to New Markets: India must diversify and expand into newer export markets to reduce overdependence on the US.
• Urgency of Deregulation: The deregulation framework proposed in Economic Survey 2024 must move from committees to implementation.
• Addressing Economic Distress: Economic distress needs urgent attention to prevent social unrest and erosion of democratic stability.
• Avoiding Political Complacency: Political leaders must act swiftly, as complacency amid global flux could have grave economic and social consequences.

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