 "Economic growth, GDP")
In a tumultuous global economic environment, India’s 2025 Budget seeks transformative change, signalling stability and growth by embracing the anti-red tape revolution and ensuring its reforms enhance global competitiveness. While many economies oscillate between regulatory rollbacks and trade barriers, India’s approach focuses on regulatory simplification, and a trust-based compliance framework and an openness to trade.
Among the key pillars of this Budget, as highlighted by Finance Minister Nirmala Sitharaman, is a sweeping regulatory reform agenda aimed at reducing red tape and fostering a pro-business environment.
As Sitharaman stated, reform is the fuel that propels India's journey of development, ensuring that governance keeps pace with the country's evolving economic landscape.
Shifting to a trust-based regulatory model
India’s regulatory framework has long been prescriptive and onerous, often stifling businesses with excessive compliance requirements. The 2025 Budget signals a clear departure from this approach, embracing trust-based and principle-driven governance over rigid oversight. This shift is evident in several measures.
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First, the high-level committee for regulatory reforms aims to dismantle the lingering constraints of the License Raj, addressing the bureaucratic overhang that has historically hindered business growth.
Second, the Financial Stability and Development Council (FSDC) mechanism not only ensures that new regulations are well-designed but also actively reviews the impact of existing ones, identifying, and addressing responsiveness, and importantly, to develop the financial sector.
Finally, the Jan Vishwas Bill 2.0 advances the decriminalisation push by incentivising voluntary compliance, reducing the fear of excessive enforcement, and aligning India’s regulatory framework with global best practices.
Together, these reforms mark a trend towards incentive-based compliance accompanied by efforts to correct past regulatory missteps.
While the intentions are commendable, effective implementation is critical for these reforms to succeed. The high-level committee for Regulatory Reforms and the FSDC must have well-defined mandates, clear starting points, and structured functioning to avoid stagnation and defaulting into perfunctory operations. Without proper scoping and accountability, these initiatives risk becoming bureaucratic exercises rather than genuine reform drivers.
Another notable reform is the increase in FDI in insurance from 74 to 100 per cent, a move that directly addresses India's notoriously low insurance penetration. Given that insurance is a capital-intensive industry, this change is expected to attract much-needed investment and expand coverage across the country.
This aligns with the Irdai’s goal of achieving “Insurance for All” by 2047, making it a pivotal step toward financial inclusion.
While the reinvestment mandate acts as a disincentive for some investors, it ensures that foreign capital is reinvested in the domestic economy rather than repatriated — an important measure given that this year’s Economic Survey highlighted lower net FDI inflows due to increased capital outflows.
Inward and outward investment
India is both a capital importing and exporting country. It has long been among the highest recipients of FDI in the world, in the first half of 2024 it received a 26 per cent rise in FDI to $42.1 billion.
There’s nearly 17 per cent increase in Outward Foreign Direct Investment (OFDI), which touched $37.7 billion in 2024.
A Bilateral Investment Treaty framework that addresses the challenges of Indian companies investing outwards as well as investors into India is pivotal. The announcement in the Budget to revamp the model BIT and make it more investor friendly will be vital.
Enhancing Ease of Doing Business
The ease of doing business agenda, aimed at fostering a more investment-friendly and globally competitive business environment, capitalises on existing economic momentum. In recent years, the traditional dominance of Mumbai, Bengaluru, and New Delhi has waned, with economic growth becoming more democratised across the country. To encourage and accelerate this shift, the Investment Friendliness Index of States has been introduced. This is a welcome provision as it has the potential to incentivise states and promote healthy competition.
India’s tax framework has also reaffirmed its trust-based approach through the “trust first, scrutinise later” philosophy, signaling a shift away from overly aggressive tax enforcement to create a more business-friendly environment. Additionally, income tax reforms are set to boost disposable incomes, which could, in turn, stimulate consumption and drive demand in a slowing economy making it more conducive to business growth.
The Finance Minister also addressed the fast-tracking of corporate mergers. However, this as well as the revamping of the bilateral BIT areas notably lacked a clear road map for operationalisation or a defined timeline. While these initiatives are a welcome step, their effectiveness hinges on structured implementation and concrete timelines — both of which were absent from the Budget announcement. Addressing these issues is crucial, but they must not remain mere agenda items without substantive follow-through.
Conclusion
The Budget reflects a government willing to take bold steps to transform the Indian economy in pursuit of its goals. While the agenda is ambitious and commendable, its success will hinge on the government’s ability to learn from past missteps and ensure effective implementation.
(The writer is Managing Partner, Cyril Amarchand Mangaldas)
(Richa Roy and Zaarah Merchant also contributed to this article)
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
