India's 2025 Reforms: A Shift to Outcome-Driven Governance for Growth

India's 2025 economic reforms focus on outcome-driven governance. Major changes include making annual incomes up to Rs 12 lakh tax-free, replacing the Income Tax Act, introducing new Labour Codes, and overhauling rural employment schemes.

The year 2025 was marked by a wide-ranging set of economic reforms signalling a decisive shift toward outcome-driven governance aimed at simplifying regulations, boosting growth and strengthening social security for millions of citizens.

Economic reforms in 2025 reflect a maturing phase of India's governance, where the emphasis shifted decisively from "expanding regulatory frameworks" to "delivering measurable outcomes", the government said in a Year-Ender note.

The focus moved towards simplifying systems, reducing compliance burdens, and improving predictability for citizens and businesses. Across taxation, GST, labour regulation, and business compliance, reforms were designed to make every day economic interactions smoother, faster, and more transparent, strengthening trust in institutions and policy certainty, it added.

These reforms span taxation, labour laws, rural employment, MSME support, exports and the Goods and Services Tax (GST), with a clear focus on inclusivity, predictability and ease of doing business.

Major Tax Reforms

One of the most significant measures announced in the Union Budget 2025-26 is major income tax relief for individuals. Under the new tax regime, annual incomes up to Rs 12 lakh have been made tax-free, with salaried taxpayers effectively enjoying exemption up to Rs 12.75 lakh due to the standard deduction. The government said the move would raise disposable incomes and stimulate consumption and savings.

In a landmark step toward modernising direct taxation, the Income Tax Act, 1961 has been replaced by the Income Tax Act, 2025. The new law simplifies language, removes obsolete provisions and introduces a unified "tax year", replacing the earlier concepts of assessment and previous years.

Labour Reforms and Social Security

Labour reforms form another cornerstone of the 2025 agenda. The government has consolidated 29 labour laws into four Labour Codes covering wages, industrial relations, social security and occupational safety. The new framework extends social security benefits to unorganised, gig and platform workers, while improving workplace safety and simplifying compliance for employers. Nearly 10 million gig and platform workers are expected to receive annual social security support under the reforms, the statement read.

Revamping Rural Employment

Rural employment has also received a major overhaul with the enactment of the Viksit Bharat - Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, which replaces MGNREGA. The new law guarantees 125 days of paid work per rural household each year, ensures timely wage payments and links employment generation with durable asset creation in areas such as water security, infrastructure and climate resilience.

Boosting MSMEs and Credit Flow

To strengthen small businesses, the government expanded the definition of Micro, Small and Medium Enterprises (MSMEs), raised investment and turnover thresholds and doubled credit guarantee cover for micro and small enterprises to Rs 10 crore. Credit flow has been eased through collateral-free loans, faster interest rate resets and enhanced priority sector lending.

GST 2.0: Simplification of Indirect Taxes

GST reforms, branded as "GST 2.0", aim to simplify indirect taxation through a two-rate structure of 5% and 18%, reduce compliance costs and lower the cost of living through rate cuts on essential goods and services. Improved compliance has expanded the GST taxpayer base to over 1.5 crore, with gross collections reaching Rs 22.08 lakh crore in FY 2024-25, the report noted.

Export Promotion Mission

The Cabinet has approved a Rs 25,060-crore Export Promotion Mission for 2025-26 to 2030-31. The initiative seeks to unify export support schemes and help MSMEs and first-time exporters with finance, compliance, branding and market access, while generating employment across manufacturing and logistics.

(ANI)

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