Budget 2026: India Inc Hails Rs 12,20,000 Crore Capex for Manufacturing Growth

India Inc has termed the Union Budget 2026-27 as a strategic roadmap for the real economy, focusing on enhancing global competitiveness and structural reforms. Industry leaders welcomed the government's commitment to a reform-led economic path, particularly the significant increase in capital expenditure and targeted support for strategic sectors. The budget arrives at a time when global trade faces uncertainty due to rising protectionism and shifting supply chains.

The Massive Capital Expenditure Push

The centerpiece of the Union Budget 2026-27 is the substantial increase in capital expenditure. The Finance Minister announced an allocation of Rs 12,20,000 Crore for FY27, a notable rise from the Rs 11,20,000 Crore allocated in the previous fiscal year. This 9 percent increase is designed to provide a strong impetus to demand creation and industrial activity. Industry leaders believe this focus on infrastructure and regional development will play a pivotal role in crowding in private investment and enhancing overall productivity.

Mahindra Group CEO Anish Shah noted that this unambiguous policy focus on infrastructure will support the growth of tier-2 and tier-3 cities as emerging economic hubs. The sustained investment in roads, rail, and freight corridors is expected to lower logistics costs and improve the ease of doing business across the country. This capex push is seen as a foundational step toward achieving the goal of a 5 trillion dollar economy.

Strategic Frontier Sectors and Biopharma Shakti

The government has identified seven strategic and frontier manufacturing sectors for targeted intervention. A major highlight is the launch of the Biopharma Shakti scheme with an outlay of Rs 10,000 Crore over five years. This initiative aims to position India as a global leader in biotechnology and pharmaceutical innovation. Biocon Executive Chairperson Kiran Mazumdar-Shaw described this as a decisive investment in India's health and innovation future.

In addition to biopharma, the budget doubles down on the semiconductor ecosystem. The announcement of the India Semiconductor Mission (ISM) 2.0 reflects a commitment to building global-scale manufacturing capabilities. The scheme focuses on equipment, materials, and the development of Indian intellectual property, aiming to reduce critical import dependencies in the electronics value chain.

Strengthening the MSME Ecosystem

Recognizing the vital role of small businesses, the budget introduced several measures to support Micro, Small, and Medium Enterprises (MSMEs). A dedicated SME growth fund of Rs 10,000 Crore has been established to provide equity support to promising enterprises. Furthermore, the government announced a Rs 2,000 Crore top-up for the Self-Reliant India Fund to help MSMEs scale their operations and integrate into global supply chains.

Industry bodies like FICCI and ASSOCHAM welcomed these steps, noting that they address the critical challenge of access to finance. The budget also focuses on simplifying compliance through digital platforms and providing targeted incentives for sectors vulnerable to international trade fluctuations. These measures are expected to help MSMEs transition from local players to global competitors.

Countering Global Trade Headwinds

The budget strategy is heavily influenced by the external trade environment, particularly the impact of higher US tariffs. Finance Minister Nirmala Sitharaman acknowledged the strain from rising protectionism and disrupted supply chains. To support export-hit sectors like textiles, leather, and seafood, the budget offered specific duty reliefs and extended export periods for products made from duty-free imported inputs.

For seafood exporters, the limit for duty-free imports of specified inputs was increased from 1 percent to 3 percent of the previous year's export turnover. Similarly, the export period for garments and footwear made from duty-free inputs was extended from six months to one year. These adjustments are intended to protect margins and maintain volumes in a tougher global trade landscape.

Rare Earth Corridors and Strategic Materials

To secure critical resources for high-tech manufacturing, the government announced the establishment of dedicated rare earth corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. These corridors will focus on the mining, processing, and manufacturing of rare earth permanent magnets, which are essential for electronics, defense equipment, and electric vehicles.

Automotive and Sustainable Mobility

The automobile sector received a boost through infrastructure investments and a focus on sustainable public mobility. The budget allocated 4,000 e-buses for the Purvodaya states to accelerate the transition toward green transport. Leaders from Tata Motors, Mercedes-Benz, and Audi noted that improved highway connectivity and fiscal prudence would drive demand for both mass-market and luxury vehicles.

The extension of customs duty exemptions on capital goods for lithium-ion cell manufacturing was also welcomed. This move is expected to encourage deeper localization of electric vehicle components and strengthen the domestic supply chain for clean energy solutions. The focus on logistics improvement, such as faster customs clearance, will further benefit the manufacturing ecosystem.

Digital Infrastructure and Space Technology

Digital infrastructure was recognized as a primary enabler of economic growth. The budget proposed a tax holiday until 2047 for cloud providers leveraging Indian data centers, positioning India as a global hub for the digital economy. In the space sector, the allocation for ISRO was increased to Rs 13,705 Crore for FY 2026-27, signaling support for deeper private sector participation in satellite and launch vehicle programs.

Market Impact and Analysis

The Union Budget 2026-27 signals policy continuity and a firm commitment to sustainable growth. By prioritizing supply-side competitiveness over temporary stimulus, the government aims to build long-term resilience. The focus on reducing the trade deficit through strategic import management and boosting high-value exports is expected to support currency stability and investor confidence.

Analysts suggest that the emphasis on manufacturing and infrastructure will benefit capital goods, cement, and steel sectors. The targeted support for semiconductors and biopharma positions India to capture a larger share of the global value chain as corporations look for alternatives to China. The fiscal deficit target of 4.3 percent reinforces the government's commitment to macroeconomic stability, which is crucial for attracting foreign direct investment.

Conclusion

The Union Budget 2026-27 is a comprehensive plan that balances fiscal discipline with aggressive growth targets. By investing heavily in infrastructure and strategic manufacturing, the government has laid the groundwork for India to become a global industrial hub. The success of these measures will now depend on the speed of execution and the ability of the private sector to capitalize on the provided incentives. As India navigates a volatile global environment, this budget provides the clarity and predictability needed for long-term investment and economic transformation.