India’s Reform Story: From Momentum to Standstill

Eleven years ago, India felt like a country on the cusp of something big. The early years of the Modi government saw the launch of multiple schemes, projects and promises. They spanned across sectors and promised to reshape the economy. It seemed like a new era of reforms was being ushered in after years of what was called the era of policy paralysis, high corruption and double-digit inflation. Come 2025, the announcements have become fewer with no major reforms in sight. What we see today is mostly the continuation of old schemes with newer versions with minor tweaks and upgrades. While policy continuity is important, downplaying the need for major reforms is an act of self-deception. This is why it is important to examine how the reform process after the initial burst has gradually slowed down and in many areas even stalled.

Early Reform Momentum (2014–2018)

In September 2014 the government launched the “Make in India” campaign to kickstart the manufacturing engine, considered to be one of the most important sectors to bring economic growth, competitiveness and lead job creation. It aimed at boosting manufacturing to 25% of GDP by 2022. Earlier in August, the Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched which opened over 55 crore bank accounts paving the way for Direct Benefit Transfers (DBTs), fulfilling the JAM trinity (Jan Dhan–Aadhaar–Mobile). The Digital India programme (2015) was launched to enhance digital infrastructure, boosting e-governance and connectivity, while UPI since 2016 has revolutionised how Indians make payments. Complementing these, the Pradhan Mantri Mudra Yojana expanded credit access for micro and small enterprises, and Start-Up India (2016) promoted entrepreneurship and innovation.

Several reforms were initiated to build critical infrastructure of the country like the Bharatmala project for roads with an initial investment of Rs. 5.35 lakh crore, Sagarmala for port modernization, port connectivity and port industrialization at an investment of around Rs. 5.97 lakh crore. The UDAN scheme (2017) was launched for regional air travel. Reforms in railways focused on modernization, safety upgrades, and private participation in freight and passenger services, laying the groundwork for long-term efficiency gains.The dedicated freight corridor projects reflected long-term investments in connectivity and logistics efficiency.

The reforms cycle continued with the enactment of the Real Estate (Regulation and Development) Act (RERA) in 2016, bringing accountability in the real estate sector. The Goods and Services Tax (GST) Act in 2017, the biggest indirect tax reform since independence came soon after the bad harvest of demonetization. Despite some initial hiccups, GST gradually streamlined multiple indirect taxes creating a unified domestic market.

Crises and Disruptions: Reforms on Hold (2018-21):

It was around this time that the economy was hit by several speed bumps, including the twin balance sheet problem, the IL&FS crisis, and the peak of non-performing assets (NPAs) in banks. All this exposed the vulnerability of the banking and shadow banking sectors. These pressures took the government's focus away from new reforms and toward bringing the financial system back to stability.

The RBI's 2015 Asset Quality Review (AQR) pressured banks to identify bad loans that had been rolled over or passed off as restructured assets. Businesses were overly leveraged due to the 2008–2014 corporate investment boom, and bank balance sheets were severely strained as projects stalled. With gross non-performing assets (NPAs) reaching over 11% by 2018, the AQR exposed the full scope of the crisis. This twin balance sheet problem: high corporate indebtedness and stressed banks became the central challenge of the period.

In response, the government enacted the Insolvency and Bankruptcy Code (IBC) in 2016, creating a time-bound mechanism to resolve bad loans, recover value, and discipline borrowers making it one of the most significant financial sector reforms of the decade signaling that big reforms are still a part of the agenda. To stabilise public sector banks, the government undertook a large recapitalisation programme, injecting more than ?2 lakh crore between 2017 and 2019, followed by mergers that consolidated the number of PSBs from 27 to 12 by 2020. These measures, taken together, marked a decisive attempt to restore financial stability, though the adjustment came at the cost of growth momentum.

Indeed, real GDP growth steadily declined, reaching 3.1% in Q4 of FY20, a decline for the eighth straight quarter and 4.2% for the full year, the lowest in 11 years, even before the onset of COVID-19. (MOSPI) The pandemic further shifted the government’s focus to immediate crisis management, particularly healthcare and economic recovery, delaying previously announced goals and pushing targets into the future.

The numbers were pessimistic, but the government still pursued new reforms especially after securing an even bigger majority in 2019. The National Infrastructure Pipeline was launched with an initial investment of Rs. 111 lakh crore in infrastructure. Corporate taxes were slashed to 22%. During this time four new Labour Codes were introduced in 2019-20 aimed at streamlining and consolidating the complex labour laws in India that are one of the biggest challenges that employers face. Yet, as of 2025, implementation of the labour reforms remains incomplete, reflecting the uneven pace of the reform cycle.

The Stalled Years (2022-25):

In 2024, manufacturing’s share in GDP remained at 17.3% exactly where it was a decade earlier in 2014. Despite early expectations, the much-marketed “Make in India” initiative failed to deliver a significant manufacturing push. Optimism returned in 2020 with the launch of the Production Linked Incentive (PLI) scheme, yet its gains have been uneven and far from transformative. In agriculture, reform attempts through the three farm laws collapsed after year-long protests, leaving one of India’s largest sectors structurally unreformed. Since then, few bold measures have been undertaken, despite the government’s declared ambition of achieving developed nation status by 2047.

In his 79th Independence Day address, Prime Minister Modi announced GST rate rationalisation into two slabs, a reform long demanded by economists and industry alike. But can the same bureaucracy that once debated tax rates for salted versus caramelised popcorn now deliver genuine simplification? As former Chief Economic Adviser K. Subramanian remarked, “Complexity is a bureaucrat’s delight.”

The Road Ahead:

The first wave of reforms delivered gains but is no longer enough to sustain high growth. India needs the next generation of reforms to revive the reform momentum. Factor market reforms are required, especially land and labour. Land acquisition must be simplified through transparent frameworks, ensuring infrastructure and industrial projects are not delayed at birth. Labour codes must move from paper to practice if large-scale job creation is to be realised. Trade and industrial strategy requires a decisive shift from protectionism to competitiveness and deeper global trade linkages.

Other areas demand equal urgency. Agriculture needs functioning markets, investment in storage and logistics. Urbanisation requires financially empowered city governments, not just flagship missions like Smart Cities. To sustain high growth and create quality jobs India requires nothing short of a new wave of structural reforms as incremental changes cannot lead to exponential growth.