Budget gives strategic push to manufacturing sector

The Union Budget 2026-27 comes at a defining moment in India’s growth journey. Manifesting India’s aspiration to be a developed country by 2047, the Budget gives a strategic push to manufacturing, emphasising the critical role it will continue to play in India’s economic growth story.

Union Budget 2026: Follow the highlights from February 1, 2026

Despite global headwinds, the Finance Minister placed a strong emphasis on stability and policy consistency in India’s journey towards Viksit Bharat. Against this backdrop, India is steadily reinforcing its position as a resilient growth engine and a trusted destination for manufacturing and investment.

As a key driver of employment, exports, and long-term economic resilience, manufacturing remains central to India’s development priorities. The Budget’s emphasis on six critical industries — semiconductors, electronics, capital goods, rare earths, chemicals, and biopharma — signals India’s intent to move up the value chain and deepen its capabilities in technology-intensive sectors. Global manufacturing continues to shift towards higher-value, innovation-intensive activities. The growth of medium- and high-technology industries is not only higher than low-tech segments, but has also been more resilient.

Shift to high-value exports

While this will certainly help India reduce its import dependence in strategic areas, it also aligns with the need to diversify exports in high value items. India’s current export composition is concentrated on low value goods, and much of the country’s export growth comes from products that fall into low- and mid-complexity categories. It is imperative for India to pursue a significant structural shift towards high-technology and value products, such as advanced machinery, precision engineering goods, electronics, and chemicals.

Manufacturing today is no longer just about meeting domestic demand; it is about positioning India as a preferred global production base and a competitive exporter of high-value products. Achieving this transformation requires sustained capital investment, logistics efficiency, rapid technology adoption, and workforce readiness.

Support for MSMEs

The Budget also places due emphasis on labour-intensive sectors such as textiles through an integrated programme covering the entire value chain from fibres and clusters to sustainability and skilling. Measures to modernise existing industrial clusters, support artisans, promote sustainable textiles, and strengthen skilling under Samarth 2.0 are expected to boost productivity, generate large-scale employment, and strengthen India’s competitiveness in global textile and apparel markets.

Support for MSMEs is further strengthened through initiatives aimed at creating Champion SMEs, including improved access to equity and risk capital. Providing equity support to the tune of ₹10,000 crore through the SME Growth Fund is indeed pathbreaking. This is complemented by a proposal to rejuvenate legacy industrial clusters through targeted infrastructure and technology upgradation, aimed at improving cost competitiveness and operational efficiency. These measures can help our small businesses scale up, adopt technology, compete more effectively in the global marketplace, and become part of global value chains.

Recognising India’s potential to emerge as a global hub for sports goods, for instance, the Budget proposes a dedicated initiative to promote manufacturing, research, and innovation in equipment design and material sciences. This, again, is a high-value growth market globally.

Low-carbon future

The Budget also advances India’s transition towards a low-carbon industrial future. In line with a roadmap launched in December 2025, an outlay of ₹20,000 crore over the next five years has been proposed to scale up carbon capture, utilisation, and storage (CCUS) technologies across key industrial sectors such as power, steel, cement, refineries, and chemicals. The proposed outlay is expected to help hard-to-abate sectors reduce emissions while maintaining competitiveness and sustaining industrial growth.

Further strengthening the industry-academia ecosystem, the proposal to develop five University townships near major industrial and logistics corridors is a forward-looking step. By co-locating universities, research institutions, skill centres, and industry, these hubs can accelerate applied research, improve technology commercialisation, and ensure closer alignment between skills development and industry needs, an approach that has proven successful in leading manufacturing economies globally.

On the trade and tariff front, targeted customs duty measures announced in the Budget are aimed at supporting strategic manufacturing and improving competitiveness in sectors such as clean energy, critical minerals, and aerospace. Additionally, the one-time measure to allow eligible SEZ units to sell a portion of their output in the domestic market seeks to address capacity utilisation challenges arising from global trade disruptions, while maintaining a level playing field.

Sustaining the momentum

India’s manufacturing sector has already gained momentum. Recent trends indicate strengthening industrial activity, supported by improved capacity utilisation and rising business confidence. Strengthening export competitiveness and deeper integration with global markets will be key to sustaining this momentum. India’s expanding network of Free Trade Agreements provides a platform to diversify markets, scale manufacturing exports, and encourage firms to upgrade quality standards and adopt global best practices.

At the same time, the government’s continued push for regulatory reforms and Ease of Doing Business initiatives has improved the investment climate. The removal of unnecessary compliances, streamlining of approvals, and decriminalising various laws have boosted overall confidence and reduced transaction costs, particularly benefiting MSMEs. Overall, the Union Budget 2026–27 offers a comprehensive and forward-looking framework to consolidate recent gains in manufacturing and trade.

(The writer is Managing Director and Chief Executive Officer of Dalmia Bharat Group)

Published – February 01, 2026 07:35 pm IST