By Satyabrat Borah
In the wake of India’s transformative Goods and Services Tax (GST) reforms, dubbed GST 2.0, the nation stands at a critical juncture. With global economic headwinds intensifying, particularly due to the imposition of 50% tariffs on Indian exports by the United States under President Donald Trump, India must act swiftly to bolster its economic resilience. These tariffs, introduced in late August 2025 as a response to India’s continued oil purchases from Russia, have disrupted India’s export sector, affecting industries such as textiles, auto parts, and industrial machinery. The United States remains India’s largest trading partner, and the tariffs pose a significant challenge to economic growth. However, India’s economy has demonstrated remarkable strength, growing at 7.8% in the first quarter of fiscal year 2026, according to government data. The GST reforms, effective from September 22, 2025, have simplified the tax structure into two primary slabs of 5% and 18%, with a 40% slab for luxury and sin goods, aiming to boost domestic consumption and ease the burden on households. While these reforms are a significant step, they alone cannot fully counter the external pressures of global trade disruptions and tariff wars. To maintain its trajectory as one of Asia’s fastest-growing economies, India must pursue a broader set of reforms to address structural bottlenecks, enhance competitiveness, and cushion the impact of external shocks. Drawing on insights from experts like Amitabh Kant, former CEO of NITI Aayog, and other economic analyses, this article outlines ten critical reforms India needs to implement in these challenging times.
India must prioritize reducing the high cost of logistics, which currently accounts for 13–14% of GDP, significantly higher than the 8–9% in developed economies. Inefficient logistics inflate the cost of doing business, making Indian goods less competitive globally. Investments in modernizing transportation infrastructure, such as expanding dedicated freight corridors, upgrading ports, and streamlining last-mile connectivity, are essential. Digital platforms integrating logistics networks can further reduce delays and costs, enabling small and medium enterprises to compete effectively in domestic and international markets.
Power sector reforms are crucial to lower operational costs for businesses. India’s industrial electricity tariffs are among the highest in Asia, driven by inefficiencies in state-owned distribution companies and reliance on costly imported coal. Accelerating the transition to renewable energy, particularly solar and wind, can reduce costs while aligning with global sustainability goals. Privatizing distribution networks and enforcing stricter financial discipline on state utilities will improve reliability and affordability, making Indian manufacturing more competitive.
Land acquisition remains a significant hurdle for industrial and infrastructure projects. Lengthy approval processes and disputes over land ownership increase project costs and deter investment. Streamlining land acquisition through a transparent, digitized land registry system and time-bound clearance mechanisms can unlock vast tracts of land for industrial use. States must also be incentivized to reform land policies, ensuring alignment with national economic goals.
Bureaucratic red tape continues to stifle business efficiency. Despite improvements in ease of doing business rankings, India’s regulatory environment remains cumbersome, particularly for small businesses. Simplifying licensing, reducing compliance burdens, and digitizing administrative processes can create a more business-friendly ecosystem. A single-window clearance system, fully implemented across states, would significantly reduce delays and corruption.
Judicial reforms are critical to enforce contracts and resolve disputes swiftly. India’s judicial system is overburdened, with millions of pending cases delaying business resolutions. Establishing dedicated commercial courts with strict timelines for case disposal and promoting alternative dispute resolution mechanisms, such as arbitration, can enhance investor confidence. Training judges in commercial law and leveraging technology for case management will further expedite processes.
The manufacturing sector requires a sustained push to create high-quality jobs and drive long-term consumption. India’s ambition to become a global manufacturing hub is challenged by high input costs and inadequate infrastructure. Incentives for advanced manufacturing, such as electronics and semiconductors, coupled with skill development programs, can position India as a viable alternative to China in global supply chains. Policies like the Production Linked Incentive scheme should be expanded to include more sectors, with a focus on export-oriented industries.
Disinvestment of public sector enterprises must be accelerated. Many state-owned companies operate inefficiently, draining public resources. Privatizing non-strategic enterprises, such as certain public sector banks and manufacturing units, can unlock capital for infrastructure and social welfare programs. A clear roadmap for disinvestment, with transparent bidding processes, will signal India’s commitment to market-driven reforms.
Labor market reforms are essential to balance flexibility with worker protections. While recent labor codes have consolidated regulations, their implementation varies across states. Uniform adoption of these codes, coupled with incentives for formalizing the workforce, can boost productivity and attract investment. Simultaneously, expanding social security nets for informal workers will ensure inclusive growth, addressing the needs of India’s vast labor force.
Agricultural reforms must be prioritized to enhance rural incomes and stimulate demand. Despite contributing significantly to GDP, agriculture suffers from low productivity and fragmented markets. Scaling up digital platforms like e-NAM (National Agriculture Market) to connect farmers directly with buyers can reduce intermediaries and increase profits. Investments in cold storage, irrigation, and climate-resilient crops will further boost productivity, supporting rural consumption and reducing the urban-rural economic divide.
India must invest heavily in innovation and technology to stay competitive in a rapidly changing global economy. Research and development spending remains low, at less than 1% of GDP. Increasing public and private investment in emerging technologies, such as artificial intelligence, green energy, and biotechnology, can drive productivity gains. Establishing innovation hubs and providing tax incentives for startups will foster a culture of entrepreneurship, positioning India as a leader in high-tech industries.
These reforms, while ambitious, are not without challenges. The GST 2.0 reforms, which reduced tax rates on consumer durables from 28% to 18% and processed foods from 12% to 5%, are expected to boost GDP by 0.6 — 1.2%, according to analysts. However, they also risk short-term revenue losses for states, which must be offset through improved tax compliance and economic growth. The tariffs imposed by the United States, affecting over half of India’s exports, threaten industries like textiles and auto parts, which employ millions. Finance Minister Nirmala Sitharaman has emphasized that the government is committed to supporting exporters through targeted relief measures, but these must be complemented by structural reforms to enhance competitiveness.
The global economic landscape, marked by volatility and protectionism, demands that India move beyond incremental progress. Prime Minister Narendra Modi’s strategic response to the tariffs, through GST reforms and a focus on domestic consumption, has been lauded as a bold counterpunch. By reducing taxes on everyday goods like soaps, electronics, and small cars, the government has put more money in the hands of consumers, particularly the middle class and rural populations. This approach aligns with the festive season, starting with Navratri, to maximize consumption during a period of high spending. However, as Amitabh Kant notes, steady progress alone will not suffice in the face of global headwinds. India must shift key policies from the planning stage to implementation, ensuring that reforms are not derailed by bureaucratic inertia or political resistance.
Critics argue that the GST reforms, while beneficial for consumers, may not fully offset the export losses from tariffs. India’s export competitiveness in the United States, its largest market, is at risk, particularly for labor-intensive sectors. To address this, the government must diversify export markets, strengthening trade ties with regions like the European Union, Southeast Asia, and Africa. Free trade agreements, negotiated swiftly and strategically, can open new avenues for Indian goods, reducing reliance on the U.S. market.
India’s economic resilience, demonstrated over the past five years through global shocks, provides a strong foundation. Dr. Arvind Virmani of NITI Aayog projects a 6.5% GDP growth for fiscal year 2026, supported by GST 2.0 and income tax reforms. Yet, forecasts from BMI, a Fitch Solutions company, suggest growth may slow to 5.8% in 2025–26 and 5.4% in 2026–27 due to tariff impacts, underscoring the urgency of broader reforms. By addressing logistics, power, land, bureaucracy, judiciary, manufacturing, disinvestment, labor, agriculture, and innovation, India can not only counter external pressures but also solidify its position as a global economic powerhouse. The path forward requires bold execution, stakeholder collaboration, and a relentless focus on implementation to ensure that India’s economic potential is fully realized in these turbulent times.
