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Informist, Tuesday, Dec. 16, 2025

MUMBAI – India's central and state governments need to implement several structural reforms to drive the country's growth further over the coming years, according to a report by Kotak Institutional Equities. The brokerage listed the measures in a 70-page report, noting the need to improve governance, significantly increase investment, and better leverage the country's human capital.

The brokerage said lower goods and services taxes and interest rate cuts will provide only a short-term boost to consumption, which may last only a few quarters. "... but structural reforms will be critical to push India's growth to a higher level and leverage India's favourable demographics," it said.

Of the 21 supply-side reforms announced by the government between FY15 and FY20, six remain work in progress, and there has been no progress on two, according to the brokerage. Furthermore, only seven of the 21 reforms are complete or nearing completion. The 21 measures are related to investment, the banking sector, governance, and fiscal.

The brokerage outlined the required measures across three sections: investment, demographics, and reforms. The brokerage argued that the country's investment rate needs to pick up significantly, which is "critical" for job creation and higher income growth. There is a greater scope for state governments and private players to increase investment. India's investment rate has "languished" at around 30% for several years, with the private-sector investment rate stuck at 10-12%, the brokerage said.

"... states can increase spending on urban infrastructure (housing, transportation and water) with greater fiscal support from the central government; urban infrastructure is a vast opportunity and will also increase overall productivity meaningfully," it said. "The private sector can increase spending on manufacturing through a mix of incentives (linked to jobs or investment) and disincentives (lower tariff and non-tariff barriers in general over a period of time to ensure higher competitiveness for domestic manufacturers)."

Higher investment is vital for India to benefit from its demographics, it said. The brokerage estimates that 96 million people will join the working-age population over the next decade, with the working-age share rising to 69% in FY35 from 68% in FY25. The additional working-age population will include new workers as well as people from agriculture who are likely to shift to formal jobs in manufacturing and services.

Furthermore, investments will be required to create high-quality jobs. "India may require further acceleration in the number of decent-to-high paying jobs, given that the share of income tax filers is still sub-10% of the current working age population."

The brokerage acknowledged that the government has implemented several key reforms in capital, resources, and land. Going forward, the government should shift its focus to "soft" reforms in the administrative and judicial systems, which will further improve the ease of doing business.

"We see meaningful scope for improvement in the approval process of state government agencies for new investment or extant operations," the brokerage said. "A deemed approval system or a single-window clearance system in states can substantially improve the approval process for companies, resulting in expedited investments and lower project costs."

It argued that reforms were needed in the administration to streamline approvals, reduce compliance burdens, and simplify regulations. This will lower operational costs and complexity, the brokerage said.

India also requires judicial reforms, including increasing the number of judges, streamlining procedures, and eliminating outdated ones. "Prolonged resolution timelines, procedural complexities and a massive backlog of cases hinder timely settlements," it said.  End

Reported by Anshul Choudhary

Edited by Saji George Titus

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