India’s economic reform playbook has undergone a quiet but decisive shift in recent years. The annual Union Budget is no longer treated as the sole theatre for reform announcements, grand policy pivots or politically sensitive decisions. Instead, reform has become a continuous process—deliberately sequenced, often executed outside the Budget, and increasingly insulated from the noise that typically surrounds fiscal announcements. This evolution reflects both political maturity and policy pragmatism in a complex, fast-growing economy.
At the heart of this approach lies a conscious balancing act between growth and fiscal discipline. The government has resisted calls to pursue aggressive deficit reduction at the cost of economic momentum. As policymakers have pointed out, a sharper fiscal squeeze would inevitably invite criticism for choking growth, especially at a time when private investment and consumption need nurturing. Tax concessions—including a generous income tax exemption threshold of ₹12 lakh and wide-ranging GST rate cuts—were designed to support demand and ease household and business stress. These measures, however, also mean that revenue buoyancy will take time to fully materialise. While early signs of improvement are visible, the government has been clear-eyed about the lag between tax relief and revenue pickup.
Crucially, the Budget still leaves behind policy cues rather than spelling out every reform in detail. Banking reform and privatisation are prime examples. Acknowledging the political and systemic sensitivity of banking sector changes, the government has chosen not to announce sweeping measures in one stroke in the Budget. Instead, it has opted for a strategic pause—announcing the formation of a committee while deferring specifics. This is not indecision but design. By moving deliberations beyond the Budget cycle, the government creates space for quieter consultation, expert input and institutional consensus, away from immediate political pressures.
One of the most consequential issues under review is foreign direct investment in public sector banks (PSBs). The government is examining a proposal to raise the FDI cap in PSBs to 49% from the current 20%, aligning it more closely with private-sector norms and global practice. Inter-ministerial consultations are already underway, and the proposed reform panel will examine not just FDI limits, but also consolidation, governance and voting rights across the banking system.
The logic is straightforward. As credit demand expands alongside economic growth, PSBs will need sustained access to long-term capital. Higher foreign investment could provide that. Yet policymakers are acutely aware that ownership limits alone may not be enough. Voting rights remain a major deterrent for serious investors, as private banks provide up to 26% voting power; whereas investors in PSBs are capped at just 10%, regardless of the size of their equity stake.
Investors are pressing for a more coherent framework, seeking alignment between FDI caps and voting rights while accepting that the government will retain at least 51% ownership in PSBs. The debate extends to private banks as well, where demands for higher voting rights have persisted since the cap was last raised to 26% in 2012. These discussions are unfolding against the backdrop of a broader ambition: to resume bank consolidation after a six-year pause and build three to four large lenders, with at least two capable of breaking into the global top 20 between 2026 and 2028.
Parallel to banking reform is a renewed push on disinvestment and asset monetisation. The government has been explicit that proceeds from strategic disinvestment, public offerings and monetisation will be central to maintaining the fiscal glide path—especially as expenditure pressures rise from FY28, when the fiscal impact of the Eighth Pay Commission award begins to surface. The Economic Survey 2025–26 has added intellectual heft to this strategy by proposing a redefinition of a “government company” for listed CPSEs. Lowering the threshold from 51% ownership to 26% would preserve government control while enabling faster and deeper monetisation.
If implemented, this change could unlock stalled disinvestment plans, boost non-debt capital receipts and improve operational efficiency across CPSEs. At present, listed CPSEs account for about 14.5% of total trading capitalisation, but further stake sales are increasingly constrained under the current legal definition. A recalibration could put disinvestment back on a fast track after years of underperformance. The government, however, chose to be silent on disinvestment in the Budget, implying that it will process them independent of Budget announcements.
In recent times, the government has pushed through several structural pieces of legislation aimed at reshaping India’s long-term growth trajectory. All these were done beyond budget.
For example, the SHANTI Act, 2025, marks a significant opening of the nuclear sector, historically dominated by state entities. By allowing regulated private participation in plant construction, operations and research—while introducing structured liability caps aligned with global norms—the law reduces investor uncertainty and encourages innovation. Over time, greater competition and capacity could lower electricity costs, strengthen energy security and support climate commitments through a diversified energy mix.
In rural India, the Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 represents a recalibration of employment guarantees rather than a simple expansion. By increasing legally guaranteed workdays from 100 to 125 and tightening payment timelines, the Act aims to stabilise rural incomes while addressing long-standing implementation gaps. Linking employment to asset creation—such as water security and climate-resilient infrastructure—adds a development dimension. Importantly, states will now bear 40% of the cost, ensuring greater ownership and reducing incentives to game the system.
Labour market reform, long delayed despite legislative passage in 2020, is finally moving from statute to reality. The rollout of the four Labour Codes from November 2025 simplifies and consolidates a maze of laws while extending protections to gig and platform workers. Minimum wages, mandatory appointment letters and access to PF and ESIC benefits expand social security coverage, while streamlined tribunals and safety norms aim to reduce litigation. For businesses, especially those with up to 300 employees, compliance burdens ease and flexibility improve, though concerns remain among unions about the balance tilting toward employers.
Completing this reform arc is GST 2.0, one of the most ambitious indirect tax resets since the original rollout. With rate cuts on nearly 400 items, essentials and household goods have moved to lower slabs, easing consumer inflation. A simplified two-slab structure—5% and 18%, with higher rates reserved for sin goods—reduces complexity, disputes and paperwork. Faster refunds and lower input taxes improve cash flows for SMEs, even as businesses absorb short-term adjustment costs.
Taken together, these reforms underscore a clear strategy: gradualism without drift, ambition without shock. By shifting reform momentum beyond the Budget, the government is signalling that policy change is now a continuous process—less performative, more institutional. The emphasis is on sequencing, consultation and durability, even if that means revenue gains accrue slowly. In a noisy political economy, this quieter reformism may prove to be the most consequential shift of all.