The year 2025 may be hailed as one of the most consequential policy years of the Narendra Modi government’s third term. From a sweeping income-tax reset to long-pending structural reforms, the Centre pushed through decisions that shaped India’s economic strategy, social welfare agenda and long-term institutional priorities.
Income tax exemption: No tax on annual income up to Rs 12 lakh
On February 1, 2025, in her 74-minute Union Budget speech, Finance Minister Nirmala Sitharaman said there will be no tax on income up to Rs 12,00,000 per annum, under the New Tax Regime (NTR).
It was a major relief to middle-class taxpayers as resident individuals with a net taxable income up to Rs 12 lakh would not need to pay income tax. For salaried individuals who avail themselves of the standard deduction benefit of Rs 75,000 under the new tax regime, the tax-free threshold increases to Rs 12.75 lakh. This is a significant rise from the previous Rs 7 lakh income limit under the new tax regime.
New doctrine on terror
After Operation Sindoor, Defence Minister Rajnath Singh said Prime Minister Narendra Modi redefined India’s policy against terrorism, and any attack on Indian soil will be considered an act of war. Addressing Indian soldiers in Srinagar, Singh said that India’s unwavering resolve against terrorism can be gauged from the fact that it was not deterred by Pakistan’s nuclear blackmail. PM Modi reiterated India’s new resolve in several speeches through the year, in an unequivocal message to Pakistan that any act of terror on Indian soil will have far-reaching consequences for the neighbour.
GST 2.0: Major rejig in slab rates
In September, the Centre’s second major overhaul of the Goods and Services Tax (GST), referred to as "GST 2.0", came into effect, with a wide range of rate cuts. The new reforms came into force on September 22, the first day of Navratri, and were dubbed as “GST Bachat Diwas”. Under the GST overhaul, the GST Council, led by finance minister Nirmala Sitharaman, scrapped the 12% and 28% tax slabs. Furthermore, GST rates on several products and services were slashed to ease the burden on consumers and lead to direct savings. The move helped lower costs for essentials, supported manufacturing, and made healthcare and insurance more accessible.
Export Promotion Mission
The PM Modi-led Union Cabinet in November approved an Export Promotion Mission (EPM) with an outlook of Rs 25,060 crore. The move assumes significance at a time when India’s exports to the US face a penal 50% tariff.
EPM marks a strategic shift from multiple fragmented schemes to a single, outcome-based, and adaptive mechanism that can respond swiftly to global trade challenges.
100% FDI in insurance
The Rajya Sabha in December passed a bill to raise FDI in the insurance sector to 100 per cent. With an aim of providing insurance to all by 2047, it is a landmark reform that may draw more global capital into one of the world’s fastest-growing markets.
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, would lead to amendments in the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.
SHANTI Bill
The Parliament has passed the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill. It seeks to open the tightly-controlled civil nuclear sector for private participation by proposing to improve the ease of doing business for insurance companies.
Under the Bill, licences for nuclear facilities and activities can be granted to government departments and companies, joint ventures, or any person specifically permitted by the central government. This aligns with the country's target to establish 100GW of nuclear power capacity by 2047.
Census 2027
The Cabinet also approved a budget of Rs 11,718 crore for the Census 2027. The census will be conducted in two phases. It will cover the entire population in the country. The last census was carried out in 2011. The first phase, covering house listing and housing census, will be conducted between April and September 2026. The second phase, which will focus on population enumeration, will be conducted in February 2027.
Pradhan Mantri Dhan Dhaanya Krishi Yojana
Announced on February 1, PMDDKY targets 100 underperforming districts where farming faces challenges such as low crop yields, water scarcity, and limited access to resources. With an annual budget of Rs 24,000 crore for six years (2025-26 to 2030-31), the scheme aims to support 1.7 crore farmers, particularly small and marginal farmers owning less than 2 hectares of land. They comprise 86% of India’s farming population. It consolidates 36 existing agricultural schemes across 11 ministries.
National Sports Policy 2025
Also known as Khelo Bharat Niti – 2025, the policy aims to establish India as a global sporting powerhouse capable of hosting major international events, including the 2036 Olympics. The policy rests on five pillars- Excellence on the Global Stage, Sports for Economic Development, Sports for Social Development, Sports as a People’s Movement, and Integration with Education through NEP 2020.
8th Central Pay Commission
In November 2025, the Centre approved the Terms of Reference for the 8th Pay Commission. It gave the panel 18 months to submit its report, formally setting the review of pay, allowances and pensions in motion.
According to reports, January 1, 2026, has emerged as the most likely reference date, but the government has not officially confirmed when arrears will kick in.
After submission, the government usually takes around 6 months to review and implement the recommendations. This means the revised pay structure could realistically be implemented by late 2027 or early 2028.
According to News18, going by Ambit Capital’s expectation of a fitment factor between 1.83 and 2.46, the minimum salary of central government employees may be fixed between Rs 32,940 and Rs 44,280, compared with the current Rs 18,000 a month.
A fitment factor of 1.83 would raise the basic salary from Rs 18,000 to around Rs 32,940, while a factor of 2.46 would raise it to Rs 44,280.
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