Budget gives strategic push to manufacturing sector

The Union Budget 2026-27 comes at a decisive moment in India’s growth journey. Establishing India’s ambition to become a developed country by 2047, the Budget gives a strategic impetus to manufacturing and highlights the critical role it will continue to play in India’s economic growth story.

Union Budget 2026: Follow key developments on 1 February 2026

Despite global adversities, the Finance Minister laid a strong emphasis on stability and policy consistency in India’s journey towards Viksit Bharat. In this context, India is constantly strengthening its position as a resilient growth engine and a reliable destination for production and investment.

Manufacturing, a key driver of employment, exports and long-term economic resilience, remains at the heart of India’s development priorities. The budget’s emphasis on six critical sectors – semiconductors, electronics, capital goods, rare earths, chemicals and biopharma – signals India’s intention 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-tech industries has not only been higher but also more resilient than that of low-tech segments.

Transition to high value exports

While this will certainly help India reduce import dependency in strategic areas, it also dovetails with the need to diversify exports into high-value products. India’s current export composition is concentrated in low-value goods, with much of the country’s export growth coming from products falling into the low- and medium-complexity categories. It is imperative that India pursues a significant structural shift towards high-tech and valuable products such as advanced machinery, precision engineering, electronics and chemicals.

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

Support for MSMEs

The budget also pays due attention to labor-intensive sectors such as textiles through an integrated program covering the entire value chain, from fiber and clusters to sustainability and skills. Measures to modernize existing industrial clusters, support artisans, promote sustainable textiles and strengthen skills under Samarth 2.0 are expected to increase productivity, create large-scale employment and strengthen India’s competitiveness in global textile and apparel markets.

Support for MSMEs is further strengthened by initiatives aimed at creating Champion SMEs, including improving access to equity and venture capital. Providing equity support of ₹10,000 crore through the SME Growth Fund is truly groundbreaking. This is complemented by a proposal to revitalize old industrial clusters through targeted infrastructure and technology upgrading, aiming to increase cost competitiveness and operational efficiency. These measures can help our small businesses scale, embrace technology, compete more effectively in the global market and become part of global value chains.

For example, recognizing India’s potential to emerge as a global hub for sports products, the Budget proposes a special initiative to promote manufacturing, research and innovation in equipment design and material sciences. This is again a high value growth market globally.

Low carbon future

The budget also advances India’s transition to a low-carbon industrial future. In line with a roadmap launched in December 2025, an outlay of Rs 20,000 crore has been proposed over the next five years to scale up carbon capture, utilization and storage (CCUS) technologies in key industrial sectors such as power, steel, cement, refineries and chemicals. The proposed spending is expected to help hard-to-cut sectors cut emissions while remaining competitive and driving industrial growth.

The proposal to develop five University districts near major industrial and logistics corridors, further strengthening the industry-academia ecosystem, is a forward-looking step. By co-locating universities, research institutions, skills centers and industry, these centers can accelerate applied research, improve technology commercialization and ensure closer alignment between skills development and industry needs; This approach is proven to be successful in leading manufacturing economies globally.

On the trade and tariff front, the targeted tariff measures announced in the Budget aim to support strategic production and increase competitiveness in sectors such as clean energy, critical minerals and aviation. In addition, the one-time measure to allow eligible SEZ units to sell some of their production in the domestic market aims to address capacity utilization challenges arising from disruptions in global trade while ensuring a level playing field.

keep up the momentum

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

At the same time, the government’s ongoing efforts for regulatory reforms and Ease of Doing Business initiatives have improved the investment climate. Removing unnecessary compliances, streamlining approvals and decriminalizing various laws have increased overall confidence and reduced transaction costs, benefiting MSMEs in particular. Overall, the Union Budget 2026-27 provides a comprehensive and forward-looking framework to consolidate recent gains in manufacturing and trade.

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

It was published – 01 February 2026 19:35 IST