India's government has proposed a comprehensive reform agenda aimed at transforming the country's economic landscape. These proposed reforms span taxation, labour regulations, maritime governance, and international trade agreements, potentially creating a foundation for sustained economic expansion.

Proposed GST Simplification and Tax Relief

The government is considering implementing significant GST reforms, which could include streamlining the tax structure to a two-slab system. This simplification, if implemented, may deliver benefits to consumers and businesses while aiming to maintain fiscal stability.

Income tax reforms are also under consideration, which could provide relief to the middle class. The government is exploring the possibility of replacing the Income-tax Act of 1961 with a modern Income Tax Act, potentially reducing litigation and improving compliance transparency.

Proposed Labour Market Transformation

The government is working on fully implementing the Labour Codes, which would consolidate 29 fragmented laws into four comprehensive modern codes. This reform, if enacted, could create a clearer framework for businesses while enhancing worker security and benefits.

Proposed Business Environment and MSME Expansion

The government is considering significant ease of doing business reforms to remove regulatory barriers across multiple sectors. Quality Control Order reviews are being conducted, which could potentially eliminate mandatory compliance for numerous product categories, particularly benefiting MSMEs and exporters.

A proposed MSME definition expansion is under consideration:

Potential International Trade and Investment Liberalization

India is exploring ways to strengthen its global economic position through strategic trade agreements and FDI reforms. The government is considering allowing 100% FDI in Indian insurance companies, which could attract foreign capital and enhance market competition.

Key trade agreements under negotiation include:

Proposed Sectoral Modernization Initiatives

The government is considering several maritime legislations to modernize India's shipping governance. These proposed laws aim to replace Acts from 1908, 1925, and 1958, potentially reducing logistics costs and strengthening port governance.

The SHANTI (Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India) Bill is under consideration, which could mark a shift in nuclear policy, potentially allowing private and foreign participation in designated civilian projects while maintaining government control over strategic operations.

Potential Legal System Overhaul

The government is exploring the implementation of the Bharatiya Nyaya Sanhita (BNS), which would replace the Indian Penal Code of 1860. The proposed framework aims to address contemporary challenges including cyberterrorism, organized crime, economic sabotage, and gender-based violence.

Jan Vishwas reforms are being considered, which could potentially decriminalize numerous minor offences and eliminate outdated laws. The Securities Market Code Bill is also under discussion, which could unify India's securities market laws into a single framework.

These proposed comprehensive reforms, if implemented, could position India for economic growth, enhanced global competitiveness, and progress toward long-term development goals through transparent governance and expanded opportunities across various sectors.

India's public welfare delivery system is experiencing significant strain due to evolving centre-state dynamics, with Centrally Sponsored Schemes creating implementation challenges that affect program effectiveness across the country.

Financial Scale of Centre-State Transfers

A recent analysis reveals the magnitude of financial flows between centre and states, demonstrating the scale of this challenge. In FY26, total transfers are expected to exceed ₹25.00 trillion, distributed across different categories:

Centrally Sponsored Schemes include flagship programs such as PM Awas Yojana, Samagra Shiksha, National Health Mission, and MGNREGA. These programs typically follow a 60:40 funding ratio between centre and states, though variations exist for Northeastern and Himalayan states.

Implementation Conflicts and Rigid Structures

The highly centralised nature of CSS has generated friction between different levels of government. A notable example involves Kerala's rejection of the PM SHRI (Pradhan Mantri Schools for Rising India) scheme, which the state believed was redundant given its existing educational standards. The centre responded by pausing over ₹1,000.00 crore of Samagra Shiksha Abhiyan funds, leading to legal proceedings.

Structural flaws within schemes compound these challenges. The Pradhan Mantri Awas Yojana continues using beneficiary data from the 2011 census, preventing states from adding families who have fallen into poverty or removing those who have improved their economic status over the past decade.

Unspent Funds and Coordination Issues

Despite the scale of funding, utilisation remains problematic. The analysis highlights that approximately ₹1.60 trillion of CSS funds were lying unspent due to rigid implementation rules. This situation creates a paradox where substantial resources remain idle while pressing local requirements go unaddressed.

States cannot repurpose these unused funds for other developmental needs, exacerbating the friction between centre and states in public welfare program implementation.

Declining State Autonomy in Spending

The composition of transfers reveals a concerning trend for state autonomy. While devolution represents the only untied portion of transfers, allowing states complete discretion over spending decisions, its relative share has declined over time. Despite the 14th Finance Commission increasing states' share of divisible taxes from 32% to 42%, states continue receiving only 30-35% of total central tax collections.

Implications for Fiscal Federalism

Both the 14th and 15th Finance Commissions have warned that excessive reliance on conditional transfers risks undermining fiscal federalism foundations. States, being closest to citizens' needs, have historically demonstrated innovation in social programs, with successful initiatives like MGNREGA and Midday Meal Scheme originating at state level before national adoption.

The current system's rigidity prevents states from tailoring programs to local realities, potentially reducing overall welfare outcomes. In a diverse country like India, empowering states with greater implementation flexibility could enhance both administrative efficiency and program effectiveness, moving beyond the current approach of multiplying schemes without addressing fundamental structural constraints.