India set for reform sprint to address economic risks as govt gets election-free corridor: Report

With no major state elections until early 2027, the government is entering a rare political pause, and analysts say it could trigger a sharper economic push.

A strategy note by Kotak Institutional Equities argues that this 10-month “election-free corridor” gives policymakers room to confront a weakening macro backdrop marked by high crude oil prices, monsoon-linked food inflation risks, and a widening current account deficit (CAD).

The report, authored by MD & Co-Head Sanjeev Prasad, outlines a clear policy priority list. At the forefront is energy subsidy rationalisation. Despite earlier moves toward fuel price liberalisation, recent trends, including tighter control over retail fuel prices and continued LPG support, indicate unfinished reforms. With oil prices elevated, the fiscal burden of subsidies is once again in focus.

More from Business

Second, trade diversification is expected to accelerate as India looks to hedge against global supply chain disruptions and geopolitical concentration risks. This aligns with the third key objective, finalising the India–US Bilateral Trade Agreement, a deal that could unlock export growth and deepen strategic economic ties.

Finally, Kotak expects a renewed push on slow-moving reforms, many of which have seen uneven progress.

The note highlights that while India has achieved “critical mass” in several supply-side reforms, including GST rollout, DBT expansion, PSU bank consolidation, and the Insolvency and Bankruptcy Code, execution gaps remain. Key areas such as privatisation, power sector reforms, land and judicial reforms continue to lag, while some sectors have seen partial reversals, particularly in fuel pricing autonomy.

The macro risks, however, are immediate. A sub-par monsoon could drive up food prices, complicating inflation management. Simultaneously, elevated oil imports threaten to widen the CAD, putting pressure on the rupee and external balances.

In that context, the absence of electoral pressure presents a narrow but crucial opportunity. Kotak’s message is blunt: India has laid the reform groundwork; now it needs to execute.