Modi Government Accelerates Reform Push as Trade Headwinds Intensify
Prime Minister Narendra Modi’s government has stepped up the pace of economic reforms in recent months, aiming to insulate India’s economy from rising global trade risks, including steep US tariffs. After a sluggish start to the year, policymakers have used the final parliamentary session to push through long-pending legislative changes that businesses and investors have sought for years.
The reform momentum comes as India grapples with weakening exports to the United States, its largest trading partner, following US President Donald Trump’s decision to impose tariffs as high as 50% on select imports. Against this backdrop, the government is repositioning India as a more attractive, diversified and resilient investment destination.
Parliament Clears High-Impact Bills in One of Its Most Productive Sessions
In one of the most active winter sessions in recent years, Parliament approved a series of landmark bills aimed at modernising India’s economic framework. According to PRS Legislative Research, this was the most productive winter session in five years, with 61.7 hours spent on legislation and eight bills passed by both houses.
Key reforms cleared during the session include:
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Opening India’s nuclear power sector to private companies
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Allowing 100% foreign ownership in insurance firms
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Proposing a single unified securities market code to modernise capital market regulations
These measures are expected to unlock hundreds of billions of dollars in long-term investments and deepen market participation across sectors.
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Nuclear, Insurance and Capital Markets Take Centre Stage
The decision to allow private participation in nuclear energy marks a significant policy shift in a sector traditionally dominated by the state. The Adani Group has already announced plans to build a commercial nuclear energy project in a northern state, signalling early investor interest following the reform.
Similarly, the move to permit full foreign ownership in insurance companies is aimed at attracting global insurers and boosting capital inflows into a sector critical for long-term savings and risk protection.
The finance minister’s proposal to unify securities market laws under a single code is expected to simplify compliance, improve transparency and encourage wider participation from domestic and global investors.
Labour, Tax and Trade Reforms Gain Momentum After Slow Start
After a cautious beginning to the year, the Modi government has moved decisively over the past four months to revive reform momentum. Measures taken include:
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Cutting consumption taxes to support domestic demand
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Implementing overhauled labour codes to improve hiring flexibility
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Fast-tracking trade negotiations with key global partners
India has already signed two free trade agreements this year—one with the UK and another with Oman—reflecting a push to diversify export markets amid uncertainty around US trade policy.
Reform Drive Seen as Shield Against US Tariffs
Economists view the latest policy push as a strategic response to growing trade risks from the US. India’s exports to America have weakened since higher tariffs were imposed in August, and there is still no clarity on when a bilateral deal to lower tariffs will be finalised.
“These moves signal a policy shift toward diversification, structural reforms, and attracting long-term capital,” wrote economists Sonal Varma and Aurodeep Nandi of Nomura Holdings Inc.
“We see smoother sailing in 2026,” they added, forecasting economic growth of 6.9% for the year.
While growth projections for the current fiscal year have been revised upward, economists expect a steadier pace of around 6.5% next year—still below the 8% plus growth India needs to achieve developed-nation status by 2047.
Export-Dependent States Sound Alarm on Tariff Impact
The urgency behind the reform drive is underscored by mounting pressure from export-heavy states. Tamil Nadu, a manufacturing hub for textiles, footwear and electronics, warned the central government that US tariffs are causing “irreparable damage” to local businesses.
State officials said exporters are suffering losses running into hundreds of millions of dollars per day, highlighting the real-economy impact of prolonged trade uncertainty.
At the macro level, the pressure has also been visible in currency markets. The rupee has slipped to a record low and is down over 5% against the US dollar this year, making it Asia’s worst-performing currency.
Political and Economic Stakes Rise Ahead of State Elections
The burst of legislative action has also given fresh momentum to the ruling Bharatiya Janata Party (BJP), which has faced a more assertive opposition in recent months. Parliament had earlier been disrupted by protests over electoral transparency and tensions with Pakistan, slowing policy progress.
The latest reform push strengthens Modi’s political hand ahead of five key state elections next year, while reinforcing his long-term vision of transforming India into a developed economy.
“The rupture with Washington — which saddled India with the world’s highest US tariff rate — has injected urgency into improving the business climate,” wrote Bloomberg geoeconomics analyst Chetna Kumar.
“A string of state election wins has also strengthened Modi’s hand for overdue changes.”
Investor Takeaway: Reform Momentum Offsets External Risks
For investors, the message from New Delhi is increasingly clear: while global trade headwinds remain, India is doubling down on structural reforms to attract capital, boost competitiveness and sustain growth.
By opening protected sectors, simplifying regulations and accelerating trade partnerships, the Modi government is attempting to offset external shocks with domestic policy strength. Whether these reforms are enough to fully cushion the impact of US tariffs remains to be seen, but the renewed urgency marks a decisive shift in India’s economic strategy—one that markets and global investors will be watching closely in the months ahead.
