India’s reform express: Stability, sovereignty and a growth story written in data

As of January 2026, the macro headline is unambiguous. India’s real GDP growth trajectory remains among the strongest in the world’s major economies.

• EU close to finalising free trade agreement with India after Davos talks
• India's GDP growth projected at 7.4% for FY 2025–26, with low inflation at 1.33%
• Reforms: tax relief, simpler GST, more financial inclusion

Did our AI summary help?

By Pradeep Bhandari

At the World Economic Forum in Davos on January 20, European Commission President Ursula von der Leyen said the European Union is close to finalising a free trade agreement with India—what she noted some have called the “mother of all deals”—and underlined Europe’s intent to keep global trade channels open through deeper international cooperation.

She added that she would travel to India immediately after Davos to take forward work on the proposed agreement, placing the India partnership at the centre of the EU’s wider trade strategy. That Europe is moving with urgency toward an India deal is, in itself, a vote of confidence in the stability and credibility India has built under Prime Minister Narendra Modi—where consistent reforms, predictable policymaking, and delivery at scale have made India a dependable partner in an increasingly fragmented world.

Positive spinoff from sound macroeconomic fundamentals

Amid this churn, India stands out for something increasingly rare: macroeconomic steadiness backed by policy continuity. And it is difficult to separate that steadiness from the political fact of the last decade—India has had a leadership that has insisted on long-horizon reforms, institutional capacity building, and a governance style that prioritises execution at scale.

Prime Minister Narendra Modi has described this approach as India boarding a “Reform Express”—a phrase that is aspirational by design, but also descriptive of a reform agenda that has moved with speed, sequencing, and intent.

A growth signal the world cannot ignore

As of January 2026, the macro headline is unambiguous. India’s real GDP growth trajectory remains among the strongest in the world’s major economies. The economy delivered 8.2% growth in Q2 FY 2025–26, and the First Advance Estimates project 7.4% real GDP growth for FY 2025–26.

In a period when many countries are struggling to protect even moderate growth while managing geopolitical spillovers, India’s numbers read like a strategic statement: this is an economy expanding not by accident, but by design.

Inflation control: The middle class feels it first

Stable growth matters, but politically, what matters even more is what households experience. Inflation is the most “everyday” macro variable; it shapes the mood of the middle class and the common citizen, and it influences trust in governance.

Here the numbers are equally telling. Headline CPI inflation was 1.33% year-on-year in December 2025. For families, this means real purchasing power is protected. For businesses, it means input costs are more predictable. And for policymakers, it creates space—space to plan rather than panic, and to govern with strategic confidence instead of reactive caution.

Industry and jobs: Reform has to show up on factory floors

A serious political economy test is whether growth is broad-based and employment-supportive. India’s industrial performance points to steady traction. The IIP grew 4% in September 2025, with manufacturing up 4.8%. Within that, sectors like basic metals (12.3%) and electrical equipment (28.7%) showed strong growth—signals that domestic production and investment activity are not merely holding, but strengthening.

On the jobs and formalisation front, the story is directionally positive. The PLFS unemployment rate (15+ years) declined to 4.7% in November 2025, and EPFO net additions were 21.04 lakh in July 2025, up 5.55% year-on-year. In political terms, this matters because formalisation is not an abstract economic concept—it is the difference between informal vulnerability and structured security, between uncertainty and steady income.

Citizen-first reforms: Taxes, GST simplification, and ease of living

The flagship example is direct tax relief. Under the new tax regime, no income tax up to Rs 12 lakh, and for salaried individuals, the effective threshold rises to Rs 12.75 lakh due to the Rs 75,000 standard deduction. Whatever one’s ideological lens, this is a direct signal: a governance philosophy that treats the taxpayer not as a target, but as a stakeholder whose confidence fuels consumption and growth.

Similarly, the direction of GST reform has moved toward simplification and rationalisation. The key political point is not merely the number of slabs, but the intent: reduce friction, ease compliance, and lower the day-to-day tax complexity that frustrates households and small businesses.

And despite rationalisation, the revenue engine remains buoyant—December 2025 gross GST collections were Rs 1,74,550 crore (up 6.1% YoY), and April–December FY26 collections were about Rs 16.5 lakh crore (up 8.6%). This combination—simplification without fiscal collapse—strengthens the credibility of the reform project.

External resilience: India grows even when the world fragments

In a world of disrupted trade routes and rising protectionism, export performance is both an economic and a diplomatic signal. India’s external sector has shown resilience: total exports (merchandise + services) reached $634.26 billion during April–December 2025, up 4.33% year-on-year. That matters because it suggests India is not only expanding domestically, but also sustaining competitiveness externally—an essential condition for any economy with global ambitions.

Participation and inclusion: a broader economic base

An economy is politically stable when its growth is socially legible—when people can see themselves in the story. India’s widening financial participation supports this. Reported figures show over 21 crore demat accounts as of October 2025, and SIP inflows of Rs 3.34 lakh crore in 2025, with monthly contributions peaking around Rs 31,000 crore in December. This is not only a market story; it is a societal shift toward formal savings, investment habits, and long-term wealth building.

On inclusion, the reduction in multidimensional poverty is a major governance claim: 24.82 crore people are reported to have exited multidimensional poverty over nine years. Politically, this is central—because it frames the reform agenda as not just pro-growth, but also capacity-building for those historically left out.

Future-readiness: Insurance, nuclear, and digital infrastructure

The political character of reforms is also visible in future-facing sectors. The move to 100% FDI in insurance signals intent to deepen competition and capital. The push to modernise the nuclear framework through the SHANTI Bill signals seriousness about long-horizon energy security. And major digital/AI investments—such as Google’s announced $15 billion commitment over five years—add weight to the claim that India is positioning itself as a technology-driven growth engine, not a passive consumer of global innovation.

This is why the “Reform Express” line lands with force: it frames India’s economic trajectory as a product of direction, discipline, and governance choices. Critics may debate ideology, but data is harder to dismiss. And in a world running on uncertainty, India’s message is increasingly clear: reforms are not a phase—reforms are the platform.

Pradeep Bhandari is National Spokesperson, Bharatiya Janata Party. Views are personal and do not represent the stand of this publication