Thirty-five years after the 1991 liberalisation, India's per capita GDP rose from $371 to $2,703 by 2025. Yet China reached $13,862 and Vietnam $5,066 over the same period. The World Bank estimates 5.3% of Indians lived below $3-a-day poverty in 2022. Over 5 crore court cases remain pending. A Deregulation Commission was announced in February 2025. The next reform phase targets state capacity, judicial efficiency, skills, and fiscal quality rather than simple deregulation.

The 1991 reforms were a supply-side correction: excessive state control was strangling private initiative, so the remedy was liberalisation — fewer licences, open imports, foreign investment. That logic worked. India's economy grew, poverty fell, and a services sector of global scale emerged. But the 2026 constraint is structurally different. The problem is no longer too much state; it is a state that cannot deliver what a complex market economy requires — enforceable contracts, quality schools, predictable regulation, and functional local government.

The IMF has flagged regulatory costs, weak firm growth, and poor trade integration as productivity drags. More than 5 crore pending court cases mean contracts are unenforceable in practice. The Insolvency and Bankruptcy Code, designed for time-bound resolution, is undermined by tribunal delays. Manufacturing's failure to generate jobs — despite PLI schemes — reflects this institutional weakness: subsidies cannot compensate for slow dispute settlement, skill gaps, and uncertain regulation.

Critically, most of these reforms lie with state governments, not Delhi. Education, health, land records, labour, and local commerce are state subjects. The 16th Finance Commission has noted that fiscal devolution to municipalities and panchayats remains incomplete. This means federal reform — giving local bodies revenue, staff, and authority — is not peripheral but central to India's next growth chapter. Unlike 1991, this reform cannot be announced in a single Budget speech.