The Union Budget 2026-27 places a decisive bet on strengthening India’s manufacturing base, with a sharp focus on strategic sectors such as semiconductors, electronics, biopharma, rare earths, textiles, transportation, energy storage and capital goods.
To meet future demand in a tech-driven world, the government announced India Semiconductor Mission (ISM) 2.0 to scale up domestic production of semiconductor equipment and materials, develop full-stack Indian IP, strengthen supply chains, and drive industry-led research and skilling.
The Electronics Components Manufacturing Scheme has also been expanded, with its outlay nearly doubling to ₹40,000 crore.
The Budget introduces Biopharma SHAKTI, with an outlay of ₹10,000 crore over five years, aimed at positioning India as a global biopharma manufacturing hub.
The initiative will support biologics and biosimilars production, establish new research institutes, upgrade existing ones, create over 1,000 accredited clinical trial sites, and strengthen regulatory capacity to meet global standards.
Innovation and Regulatory Strength
“The ₹10,000-crore Biopharma Shakti programme will be a key enabler for India’s journey from volume to value leadership, helping the country move from being a global supplier of quality medicines to becoming a global innovator. Alongside the expansion of the national clinical trials network and strengthening of the CDSCO with specialised scientific review and globally aligned timelines, these initiatives will enhance India’s capacity to develop complex, high-value therapies,” said Satish Reddy, chairman, Dr. Reddy’s Laboratories.
Amid global uncertainty, Rare Earth Corridors will be developed across Odisha, Kerala, Andhra Pradesh and Tamil Nadu to promote mining, processing, research and manufacturing of rare earth permanent magnets. Additionally, three Chemical Parks will be set up under a challenge-based, plug-and-play model to reduce import dependence.
“The Budget strengthens India’s industrial value chain—from critical minerals and rare earths to batteries, power electronics and logistics. Initiatives like ISM 2.0, rare earth corridors, and duty relief for lithium‑ion manufacturing will reduce supply-chain risks, boost competitiveness, create jobs, and advance India’s self-reliance,” said Nishant Arya, vice chairman, JBM Group.
Infrastructure and Capital Goods
To enhance capital goods capability, Hi-Tech Tool Rooms will be established by CPSEs, alongside a new scheme for advanced construction and infrastructure equipment. A ₹10,000-crore Container Manufacturing Scheme to support exports and logistics.
The labour-intensive textile sector will see an integrated push covering fibre, employment, sustainability, skilling and mega textile parks.
Customs duty exemptions were also announced for civil and defence aviation manufacturing, energy storage systems, solar glass inputs, nuclear power projects and critical minerals processing. Further, excise relief was proposed for biogas-blended CNG.
“The full customs duty exemption on waste and scrap of lithium ion batteries and critical minerals directly addresses long standing challenges around feedstock availability and cost. The Budget strengthens material security and enables a more circular battery supply chain,” said Gaurav Dolwani, founder and CEO, LICO Materials.
To support SEZ manufacturers facing global trade disruptions, the Budget allows a one-time concessional domestic sale within prescribed limits, helping optimise capacity use, ease bottlenecks, and improve liquidity.
To strengthen legacy industries and MSMEs, a scheme will revive 200 industrial clusters through infrastructure and technology upgrades. A three-pronged MSME strategy will also nurture “Champion SMEs” and support micro enterprises.
The Budget also announced seven high-speed rail corridors as growth connectors and raised capital expenditure by about 9% to ₹12.22 lakh crore.
“The impetus given to infrastructure, with public capital expenditure rising to ₹12.2 lakh crore, will support growth momentum, crowd in private investment, reduce logistics costs and generate employment,” said Anant Goenka, president, FICCI.