Vincent Fernandes

India's financial sector reforms have evolved from the foundational 1991 Liberalisation, Privatisation, and Globalisation (LPG) framework into modern structural and digital interventions aimed at sustaining a projected GDP growth rate of 6.8%–7.2%.

India's financial and structural reforms continue to anchor the country as one of the fastest-growing major economies, with the International Monetary Fund (IMF) projecting a 7% GDP growth rate for FY 2026–27 and FY 2027–28, supported by strong domestic demand, robust services activity, and steady financial intermediation.

In a major relief for Indian families and individual taxpayers, the Union Budget 2025-26 introduced substantial reforms in direct taxation, ensuring that annual incomes up to ₹12 lakh are exempt from income tax under the new regime, with the effective exemption rising to ₹12.75 lakh for salaried taxpayers on account of the standard deduction. This change reaffirmed the Government’s commitment and left millions of middle-class households with higher disposable income, boosting consumption, savings, and investment.

The reforms expand the safety net for India’s workforce, with nearly 10 million Gig and Platform workers receiving annual social security support. Women workers benefit from assured leave provisions, maternity benefits and improved workplace safety. Overall, the Labour Codes mark a decisive shift from rule-heavy regulation to outcome-based governance, creating one unified framework for over 50 crore workers across sectors. Additionally, the codes lay a strong foundation for a future-ready workforce and resilient industries aligned with India’s long-term growth aspirations.

In a major boost to India’s trade competitiveness, the Union Cabinet approved the Export Promotion Mission (EPM) as a flagship structural reform with an outlay of ₹25,060 crore for FY 2025–26 to FY 2030–31. Announced in the Union Budget 2025–26, EPM marks a strategic shift from fragmented export support schemes to a single, outcome-based and digitally driven framework, aimed at empowering MSMEs, first-time exporters, and labour-intensive sectors. The Mission integrates financial support (Niryat Protsahan) including affordable trade finance and credit enhancement with non-financial enablers (Niryat Disha) such as quality compliance, branding, logistics, and market access. In its October 2026 World Economic Outlook (WEO), the IMF projected India’s growth at 7 per cent in both 2026 and 2027 on a fiscal-year basis, keeping the country among the world’s fastest-growing major economies.

The 2026 forecast represents an upward revision of 0.6 percentage points from the July 2026 WEO Update and 0.5 percentage points from the April forecast. The projection for 2027 was raised by 0.3 percentage points from July and 0.5 percentage points from April.

India’s economy expanded by 7.8 per cent in fiscal year 2025-26, according to the report, which presents fiscal-year data under the year in which the fiscal period begins. On a calendar-year basis, the IMF projected India’s growth at 7.4 per cent in 2026 and 7 per cent in 2027. The Fund said the upward revision “reflects stronger-than-expected momentum, supported by resilient domestic demand and robust services activity”. “India’s growth remained robust, underpinned by domestic demand and services, despite higher oil prices,” the report said. The IMF noted that the medium-term global economic outlook had become increasingly uneven, with downward revisions concentrated in economies directly affected by the Middle East conflict and energy-importing emerging and developing economies, excluding India.

“India stands out with upward revisions, reflecting sustained momentum and growing evidence of stronger growth potential supported by favourable demographic dynamics, a large and expanding domestic market, and continued structural reforms,” it said.

On inflation, the IMF projected India’s consumer prices to rise by 5 per cent in 2026, compared with 2 per cent in 2025, before moderating to 4.4 per cent in 2027.

The country’s current account deficit is expected to widen to 1.5 per cent of GDP in 2026 from 0.7 per cent in 2025, before narrowing to 1.3 per cent in 2027.

The IMF’s baseline projections assume average oil prices of $95.74 per barrel in 2026 and $87.39 in 2027, compared with $67.74 in 2025.

Global headline inflation is expected to increase to 4.7 per cent in 2026 before easing to 4.1 per cent in 2027.

“Global activity is projected to grow at 3.1 per cent in 2026 and 3.4 per cent in 2027,” IMF Chief Economist Silvana Tenreyro wrote in a blog accompanying the report. The IMF warned that risks to the global economic outlook remain “skewed to the downside”, particularly due to geopolitical tensions and uncertainty surrounding energy markets. “A prolonged stalemate or further escalation in the Middle East could keep energy and food prices elevated and volatile, revive inflationary pressures, worsen fiscal and external balances, and weigh on growth,” the report said.