Context:
- India’s 2025 Budget signals a transformative shift towards growth and stability amid a volatile global economic environment.
- The focus is on regulatory simplification, business-friendly reforms, and enhancing global competitiveness.
Key Pillars of the Budget
Regulatory Reforms
- Trust-based compliance framework displaces the rigid, prescriptive regulations.
- Focus on reducing red tape and a pro-business environment.
- Main steps would involve
- A high-level committee for regulatory reforms to tackle the License Raj.
- The Financial Stability and Development Council (FSDC) to study existing regulations and reviews of impact assessments.
- Jan Vishwas Bill 2.0 to encourage voluntary compliance and curtail excessive enforcement.
Inward and Outward Investment
- India is both a capital importer (up 26% in FDI) and an exporter (up 17% in Outward FDI).
- Renewed Bilateral Investment Treaty (BIT) for both inward and outward investors facing challenges.
- Increase the FDI cap in insurance to 74% percent to 100 percent to promote investment and increase the low penetration of insurance.
Challenges and Implementation Concerns
Implementation Risks
- The reforms outlined require effective execution, but lack concrete roadmaps and timelines.
- Agencies like the FSDC and regulatory reform committees need clear mandates and structures to avoid bureaucratic delays.
- Without accountability and scoping, the reforms risk becoming perfunctory rather than transformative.
Foreign Direct Investment (FDI) and Insurance Reforms
- Sector reform in insurance would attract investment to increase coverage and financial inclusion. Increased FDI limits are going to increase the coverage, bringing the country closer to the objective of “Insurance for All” by 2047.
Tax Reforms and Corporate Mergers
- Tax framework reforms indicate a change in the system to be a trust-first, scrutinize-later approach, hence creating a business-friendly environment.
- Income tax reforms seek to enhance disposable income, which can lead to a boost in demand in the economy.
- Corporate merger fast-tracking is another major reform however, with no clear operational timelines.
