India is demonstrating significant economic resilience and growth, with Union Ministers expressing strong confidence in the nation's upward trajectory. Union Minister Jyotiraditya Scindia announced that India has surpassed Japan to become the world's fourth-largest economy and is projected to overtake Germany by the end of 2027 to claim the third spot globally. Echoing this sentiment, Commerce Minister Piyush Goyal stated that India is set to become the world's third-largest economy within the next 2-2.5 years, targeting a $25-30 trillion economy by 2044 and over $30 trillion by 2047. The International Monetary Fund (IMF) projects a robust 6.6% growth for the fiscal year 2025-26, building on a 7.8% expansion in the first quarter.
Key Reforms and Policy Initiatives
The Indian government has been proactively implementing a series of far-reaching economic and financial reforms. During the recent parliamentary session, crucial bills were approved to allow 100% foreign direct investment (FDI) in insurance companies and to open the nuclear industry to private firms. Furthermore, a proposal to unify India's securities market laws under a single code was tabled, aiming to modernize the framework and encourage greater market participation.
The Reserve Bank of India (RBI) continues its accommodative stance. The Monetary Policy Committee (MPC) reduced the policy repo rate by 25 basis points to 5.25% in its December 3-5, 2025 meeting, marking the fourth rate cut in the calendar year, totaling 125 bps. The minutes of the meeting suggest potential for further rate cuts amidst emerging deflationary trends and risks to domestic economic growth.
The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, outlined a strategy focused on four key growth engines: Agriculture, MSMEs, Investment, and Exports. Significant proposals included an Export Promotion Mission, the BharatTradeNet digital platform, and regulatory simplification. Notably, the budget also proposed no personal income tax for incomes up to Rs 12 lakh under the new tax regime. In the social welfare domain, four new labor codes, enacted on November 21, 2025, aim to streamline compliance and formalize the informal economy. Additionally, excise duties on tobacco, cigarettes, and pan masala were raised through new legislation, replacing the expiring GST compensation cess.
Trade and Export Performance
Despite challenges such as the 50% US tariffs imposed in August, which have impacted Indian exports, the government is actively devising alternative strategies, including regulatory reforms and strategic trade agreements, to mitigate risks and attract investment. Vice-President C. P. Radhakrishnan emphasized the critical role of apparel exports in India's economic growth and the 'Viksit Bharat' vision, noting the sector provides direct employment to over 45 million people.
India's electronics exports have shown remarkable growth, reaching $31 billion in the first eight months of FY26, a 38% year-on-year increase, as highlighted by Electronics and IT Minister Ashwini Vaishnaw. The automotive sector is also setting new records, with passenger car exports projected to exceed 1 million units in 2025. Furthermore, the pharmaceutical and healthcare sectors are emerging as crucial pillars for reviving economic ties between India and Afghanistan, with Afghanistan heavily relying on Indian pharmaceutical imports. India is also pursuing multiple trade negotiations, including a new free trade agreement with Oman.
Other Notable Developments
India's startup ecosystem continues to flourish, with tech startups raising $10.5 billion in 2025, positioning the country as the third-largest globally in terms of funding. The Department of Posts has expanded its role beyond traditional mail services, undertaking nearly five lakh door-to-door KYC verifications for mutual fund investors and collaborating with financial institutions like AMFI, UTI, and SBI Mutual Fund. It has also ventured into telecom services through an MoU with BSNL. In a banking development, the RBI assigned Bank of Baroda as the Lead Bank for the newly formed "Vav-Tharad" district in Gujarat.