India’s economic fundamentals have been reaffirmed by global rating agencies in 2025. Despite global trade tensions, India’s sovereign strength and structural reforms have boosted investor confidence. The country’s focus on ease of business, formalisation, financialisation and technology integration has attracted foreign direct investment (FDI). Recent policy reforms and institutional mechanisms have enhanced capital inflows and encourageed innovation, positioning India as a key player in the global economy.
Structural Resilience and Investment Climate
India has built a resilient economic framework through gradual reforms. The government’s barbell strategy combines policy reforms with technology adoption at scale. This has improved ease of doing business and attracted over $1 trillion in FDI since 2000. In 2025 alone, FDI inflows reached nearly $25 billion. The removal of exit barriers for investors has made India more attractive globally. Initiatives like SEBI’s SWAGAT-FI and RBI’s updated FEMA guidelines simplify foreign investments and promote rupee usage in trade.
Policy Initiatives and Formalisation
Several flagship schemes have driven formalisation and financial inclusion. PMAY has sanctioned 3.2 crore houses, while MUDRA has extended ₹33.65 lakh crore to over 52 crore accounts, mostly women entrepreneurs. PM-SVANidhi supports 68 lakh street vendors through loans. UDYAM portal has registered over 6.86 crore MSMEs. Labour and compliance portals like SHRAM SUVIDHA have streamlined registrations for millions. Rural property ownership is digitised under SWAMITVA, covering 3.20 lakh villages. Urban land records are integrated via NAKSHA in 150 cities, expanding nationwide. SASCI provides 50-year interest-free loans to states for capital expenditure.
Tax Growth and Corporate Formalisation
Since 2021, GST collections have nearly doubled. Corporate tax and income tax revenues have more than doubled and increased by 143% respectively. The taxpayer base expanded by 37%, adding 2.5 crore new taxpayers. Corporate profits outside financial sectors grew 136%. Over 1.85 lakh new companies were formed in FY24, with 1.63 lakh in FY25 so far. Nearly 8.5 lakh inactive companies were removed to clean the corporate registry. India’s efforts against money laundering and terrorism financing have won global praise.
Innovation and Capital Markets
India’s innovation ecosystem has grown rapidly. Patent and trademark filings now rival developed nations. Government support via Fund of Funds has helped start-ups survive global funding slowdowns. Since 2014-15, India has seen 764 mainboard public offerings and over 1200 SME issuances. These markets enable smooth investor exit and capital recycling. India’s possible inclusion in global bond indices will require deepening debt markets to fund infrastructure projects like NIP and PM GatiShakti. Indian firms are encouraged to adopt global mindsets and leverage diaspora talent.
Global Positioning and Future Outlook
India’s economic reforms, institutional strength and innovation capacity are reshaping its global role. The country is emerging as a preferred destination for investment and technology. Structural reforms and digitisation efforts continue to dismantle traditional bottlenecks. The synergy between government schemes and private enterprise is driving inclusive growth. India aims to anchor its brand globally and sustain its growth momentum in a competitive geopolitical environment.
Questions for UPSC:
- Critically discuss the role of structural reforms in enhancing India’s investment climate and economic resilience.
- Examine how financial inclusion schemes like MUDRA and PM-SVANidhi contribute to inclusive economic growth in India.
- Analyse the impact of innovation and intellectual property rights on India’s global competitiveness. How can academia-industry collaboration be strengthened?
- With examples, discuss the significance of formalisation of the corporate sector and tax base expansion in India’s economic development since 2020.
