India’s economic story in 2025 became one of recovery under pressure, driven by a small group of senior bureaucrats working closely with Prime Minister Narendra Modi. After a year marked by slowing growth, external shocks, and geopolitical strain, the government shifted gears, pushing through reforms and policy recalibration that set the stage for a potentially decisive year ahead.
The challenges were formidable. India faced the impact of steep United States tariffs, a brief but intense military confrontation with Pakistan, and strained relations with China. These shocks exposed the limits of post pandemic complacency following earlier growth spurts. At the same time, the government responded with a series of corrective measures that included tax relief, monetary easing, regulatory reform, trade negotiations, and diplomatic outreach, all aimed at stabilising confidence and reviving momentum.
On the regulatory front, Tuhin Kanta Pandey sought to steady markets by restoring a more consultative style at the Securities and Exchange Board of India. His tenure focused on reducing regulatory volatility after a period of frequent changes, though market participants noted that amendments, particularly in mutual fund rules, remained numerous through the year.
Within the core of government, Cabinet Secretary T. V. Somanathan emerged as a key driver of deregulation and ease of doing business reforms. Working closely with state governments, his efforts targeted decriminalisation of minor offences, streamlined licensing, land use flexibility, and labour reforms. By late 2025, multiple states had implemented dozens of such measures, signalling early but tangible progress.
Whether this reform drive continues into 2026 remains an open question. With several high stakes state elections ahead, political calculations could limit appetite for controversial reforms such as agriculture restructuring or large fiscal commitments. Yet analysts note that lower cost, less politically sensitive changes, especially in deregulation and administrative efficiency, may continue. After three terms in office, Modi’s political authority is established. The challenge now is sustaining economic reform momentum and translating policy intent into long term growth, a test that will define India’s economic trajectory in 2026 and beyond.