India has become the fifth-largest economy in the world by GDP ($4.1 trillion) and is expected to grow by around 7% per annum in FY27, making it the fastest-growing major economy globally. It is also one of the most populous countries, with a predominantly young population, making India one of the largest domestic markets and a strong source of skilled, English-speaking manpower.

Over the past year, a range of reforms and initiatives by the Government and other authorities are expected to provide a strong push to the macroeconomic environment and, in turn, support growth in financial markets. These include the following:

(1) Monetary policy easing

India’s monetary policy has shifted towards softer rates to stimulate economic growth. The Reserve Bank of India (RBI) has undertaken several measures, including a 125-basis-point reduction in the repo rate through gradual cuts and a 100-basis-point reduction in the Cash Reserve Ratio (CRR) this year. In addition, the RBI has infused liquidity through open market operations (OMOs), including purchases worth Rs 1 lakh crore in December 2025.

These measures aim to spur credit growth and lower interest rates, encouraging borrowing. Once loan growth picks up, pro-cyclical momentum could push growth to the low-to-mid teens on a YoY basis. Banks are also willing to lend, supported by clean balance sheets, while borrowers continue to deleverage.

(2) Fiscal stimulus through tax reforms

The government announced direct tax reductions in the February 2025 Budget and GST cuts in September 2025 to increase disposable income and reduce costs. These measures are already showing results, with agricultural growth appearing promising, credit expansion underway and auto sales rising following the GST cut.

(3) Regulatory reforms by the Government

India’s regulatory reforms in 2025 are aimed at improving ease of doing business, attracting foreign investment and fostering innovation. These reforms span financial markets, industry, taxation, trade and MSMEs, with a focus on digitalisation, simplification and transparency.

Financial sector reforms:

The RBI announced 22 measures to strengthen the resilience and competitiveness of the banking system, improve credit availability and streamline foreign exchange management. Key changes include liberalisation of the external commercial borrowing (ECB) framework.

SEBI has also introduced reforms to widen market participation, strengthen investor protection and enhance India’s global competitiveness.

Easing foreign investment norms:

Restrictions on foreign direct investment (FDI), particularly in insurance and defence, have been eased, improving access for global investors.

Industrial and business deregulation: