India's economic landscape is currently marked by significant policy reforms and continued growth, even as it navigates global economic complexities. A major development is the implementation of the Goods and Services Tax (GST) 2.0 reforms, effective September 22, 2025. This overhaul simplifies the tax structure to a two-slab system of 5% and 18%, replacing the previous 12% and 28% rates for many goods. This move is anticipated to boost consumption and is expected to lead to a 6-7% rise in revenues for Indian companies in the financial year 2025-26, according to Crisil.
The government's decision to cut GST rates is seen as timely, especially ahead of the festive and wedding season, aiming to stimulate spending. Key sectors like fast-moving consumer goods (FMCG), consumer durables, and automobiles are expected to benefit significantly from lower costs. Indeed, major automobile manufacturers like Hyundai, Tata Motors, Mahindra, and Renault have already begun passing on these GST benefits to consumers, resulting in price reductions for vehicles.
Economically, India continues to demonstrate strong growth, with GDP expanding by 7.4% and 7.8% in the January-March and April-June 2025 quarters, respectively. This makes India the world's fastest-growing major economy. However, challenges persist, particularly concerning foreign capital flows. Foreign Portfolio Investors (FPIs) have shown net outflows in recent financial years, including $14.6 billion in 2024-25 and $2.9 billion until September 5, 2025. This trend is partly attributed to the strong dollar and concerns over US tariffs. Chief Economic Adviser V Anantha Nageswaran noted a possible shortfall in nominal GDP growth compared to the 10.1% Budget estimate for the current fiscal year, primarily due to benign inflation.
On a brighter note, India's digital economy is experiencing robust growth, expanding 3-4 times faster than the traditional economy. It is projected to contribute approximately 20% to the nation's overall economy. This rapid digitization is attracting global attention and positions India as a potential "inclusive superpower" in the telecom sector.
In terms of international relations and investment, there is optimism surrounding improved trade links with China following a symbolic handshake between Prime Minister Narendra Modi and President Xi Jinping. This potential thaw could lead to increased investment inflows, manufacturing know-how, and access to China's clean-energy supply chains. Additionally, India and Israel are expected to sign a bilateral investment treaty in the coming week, aiming to deepen economic cooperation and provide protection for investors from both nations.
Further reforms are on the agenda, with experts advocating for land and labor reforms, trade liberalization, privatization, and judicial efficiency to sustain India's high growth trajectory. The government is also emphasizing the development of a "startup-linked economy," fostering stronger partnerships between startups and industries to ensure sustainable growth and innovation. In the corporate sector, LG Electronics is set to launch a significant Rs 15,000 crore IPO in India this October, and online education platform Physicswallah has filed for a Rs 3,820 crore IPO.