Sushma Ramachandran

The gloomy scenario being painted for the Indian economy following the U.S. levying 50 per cent tariffs on Indian exports has undergone a significant shift. The government's first advance estimates for the 2025-26 financial year indicate that the economy is projected to grow by a robust 7.4 per cent. This is considerably higher than the 6.5 per cent recorded in the previous year. It is also a step up from the government’s earlier projections of around 6.4 per cent.

At this level, India continues to be the world’s fastest-growing economy in 2026. This is in sharp contrast to the rest of the world, which is slowing down, judging by the latest U.N. Report on the World Economic Situation. The report expects global growth to reach only 2.7 per cent in 2026 owing to geopolitical risks and policy uncertainty. It pegs growth in this country at 6.6 per cent during 2026, lower than its earlier forecast of 7.3 per cent. Like the International Monetary Fund, however, it also maintains that this will be the only country to record growth exceeding six per cent during the year.

The resilience of the Indian economy in the current financial year owes much to the recent round of reforms that have provided a much-needed stimulus to spur consumption. It also reminds us that the domestic sector continues to be the dominant player in this country, unlike many others, whether in agriculture, industry or services. In contrast, exports, which have been the biggest worry over the past six months, are not as central to the growth impetus. With a 21 per cent share in the gross domestic product (GDP), they are important but not the deciding factor.

At the same time, data is now showing that even exports recorded positive growth in recent months. This is despite the barrier of 50 per cent tariffs to access the world’s biggest market. Exports to the U.S. have risen unexpectedly, while some areas like gems and jewellery have managed to expand in other markets. In other words, the efforts to diversify into alternative destinations have had some measure of success.

To elaborate, the latest Commerce Ministry data shows that exports in November 2025 rose by over 19 per cent compared to the same month last year, with merchandise exports touching 38.1 billion dollars. The key drivers for this surge in exports have been electronics, engineering goods, pharmaceuticals, petroleum products and readymade garments. One of the biggest segments was mobile phones, especially smartphones like Apple’s iPhones, which have been kept out of the hefty tariffs for the American market.

Exports of mobile phones to the U.S. surged from Rs. 5146 crore in November 2024 to Rs. 16,013 crores in November 2025. It is thus no wonder that exports to the U.S. market actually rose by as much as 22 per cent during the month, even in the face of the hefty tariff barriers..

As for the advance estimates, it is significant that the manufacturing sector, which had been a worrisome area earlier, is projected to rise by 7.4 per cent. This is in comparison to 4.5 per cent in the previous year. Services are also set to remain buoyant with an increase of  9.1 per cent compared to 7.2 per cent in the previous year. The farm sector, however, may have a setback at 3.1 per cent compared to 4.6 per cent earlier.

This shows the economy has been able to shrug off external headwinds that have led to a slowdown in most other countries. One of the biggest reasons has been the spate of reforms in recent months, the most notable of which is the restructuring of the Goods and Services Tax (GST). The need for simplifying and rationalising the GST had been felt for quite some time, as it had become far more complex than envisaged originally. The initial concept was to have a single point levy to replace the existing multiplicity of taxes.

Instead, it was bogged down by several layers of rates and slabs that made implementation difficult for business and industry. In fact, small and medium enterprises had been finding compliance an onerous exercise.

The GST restructuring last September led to commensurate price cuts over a broad range of manufactured goods in the run-up to the festival season. This gave a stimulus to consumption and consequently investment in the second half of the year.

The next big reform was the implementation of the new labour codes that had been pending ever since being passed by Parliament in 2020. The rules to bring the codes into force were finally brought into force in November 2025. The result will be to make working conditions better for employees while easing the regulatory burden on employers.  A host of measures have been taken to ensure flexibility of working norms for working women while providing social security to the vast numbers employed in the gig economy.

The launch of the new labour codes is a long-awaited initiative towards easing the regulatory burden in the system. Labour issues had been mired in a maze of rules and regulations for decades, owing to the existence of multiple laws. This legislation has been on the statute books from the colonial era and has created enormous confusion in dealing with industrial relations.

As many as 29 laws have been consolidated into the new codes, which will usher in an era of greater simplicity and clarity for both industry and workers.

While the economy thus looks set to be on a high growth path, more work needs to be done in terms of reforms. The setting up of committees to examine ways in which to bring about deregulation in both financial and other areas is a welcome development. The reports of these committees must be implemented sooner rather than later to bring about greater ease of doing business.

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The fact is that India continues to be rated as one of the most difficult countries for investors. It is now time to bite the bullet and cut red tape. This will ensure that high growth is sustained in the long run.