Indian Economy In 2025: A Year Of Big Bang Tax-GST Reforms, Trade Deals and Tariff Wars

The year 2025 marked a significant phase for India’s business and economic landscape, shaped by new trade agreements, record highs in equity and commodity markets, tax reforms, and continued global positioning as the fastest-growing major economy amid global uncertainty.

From international trade diplomacy to domestic market movements, the year reflected both expansion and recalibration for Asia’s third-largest economy.

Trade Agreements Gain Momentum

Trade policy remained a key focus area through 2025. India concluded a trade agreement with New Zealand, under which a majority of Indian exports are set to receive zero or near-zero tariff access over a phased period. The agreement also includes long-term investment commitments estimated at around $20 billion, targeting sectors such as food processing, renewable energy and manufacturing.

India also progressed on the implementation of its Economic Cooperation and Trade Agreement (ECTA) with Australia, which is scheduled to eliminate tariffs on nearly all Indian goods by 2026. Prior to the pact, several Indian exports faced duties in the 4–5% range in the Australian market.

Negotiations with the European Union and the United Kingdom continued through the year, with officials indicating progress on market access and services, though no final agreements were concluded by year-end.

Markets Touch Record Highs

Indian equity markets recorded historic milestones in 2025, even as global volatility persisted.

The Sensex crossed the 80,000 mark, while the Nifty 50 moved beyond 24,000, supported by domestic institutional inflows, banking and capital goods stocks, and continued government-led infrastructure spending.

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Commodity markets also saw sharp movements. Gold rose more than 60% during the year, touching record levels near $4,550 per ounce globally. The rally was driven by US interest rate cuts, geopolitical tensions, and sustained central bank demand.

Silver outperformed most asset classes, surging over 140% in 2025 and peaking near $83 per ounce in global markets. In India, silver prices crossed ₹2.4 lakh per kilogram, supported by industrial demand from sectors such as solar power and electric vehicles.

Rupee Weakens Against the Dollar

While equities and commodities surged, the Indian rupee came under pressure, slipping past ₹91 against the US dollar at its weakest point during the year.

The currency declined by around 4–5% over 2025, marking its worst annual performance in three years. Analysts pointed to foreign portfolio outflows, a stronger dollar, and global risk aversion as contributing factors. The Reserve Bank of India intervened periodically to manage volatility while maintaining a market-linked exchange rate approach.

GST and Income Tax Reforms Rolled Out

Tax reforms remained a key domestic development in 2025.

The government moved ahead with GST rate rationalisation, shifting several goods from the 28% slab to 18%, including consumer durables such as televisions, air-conditioners and cement. Essential goods continued to attract 0–5% GST, while luxury and sin goods remained subject to higher effective taxation of up to 40%, including cess.

On the direct tax front, the Union Budget 2025–26 revised the personal income tax structure under the new regime. A key announcement was zero income tax liability for individuals earning up to ₹12 lakh annually, enabled through an enhanced rebate. Revised slabs above that threshold ranged from 15% to 30%, depending on income levels.

Trade Stance and Global Growth Position

India also maintained a firm stance in trade negotiations with the United States, resisting requests for tariff reductions in the 2–10% range on select goods, citing the need to protect domestic manufacturing and small producers.

Despite global headwinds, India retained its position as the fastest-growing major economy in 2025. International agencies projected GDP growth between 6.3% and 6.7%, outpacing China, the United States and the European Union.

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Digital Payments and IPO Revival

India’s digital payments ecosystem continued to expand internationally, with UPI acceptance extending to countries including the UAE, Singapore and France. By the end of 2025, UPI was processing over 12 billion transactions per month, with transaction values exceeding ₹18 lakh crore.

The IPO market staged a recovery, with companies raising over ₹1 lakh crore during the year, placing India among the world’s most active equity listing markets.

Manufacturing, Semiconductors and Capex Push

Manufacturing remained central to India's economic strategy. Semiconductor projects in Gujarat, Assam and Tamil Nadu moved from planning to execution stages, supported by government incentives. Production-linked incentive (PLI) schemes continued to boost output in electronics, defence manufacturing and renewable energy equipment.

Public capital expenditure remained elevated, with government spending directed towards roads, railways, ports and urban infrastructure.

Energy, Defence and EV Expansion

India expanded its renewable energy capacity in 2025, adding significant solar and wind installations as part of its longer-term energy transition goals. Defence manufacturing also saw higher domestic procurement, with increased participation of private firms.

Electric vehicle adoption accelerated, with record sales reported across two-wheelers, passenger vehicles and commercial segments. It was supported by charging infrastructure expansion and state-level incentives.

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