Union Budget 2026: Manufacturing, Infra & MSMEs Get Major Boost

Introduction: A Growth-Oriented Budget for 'Viksit Bharat'

Finance Minister Nirmala Sitharaman presented her ninth consecutive Union Budget on February 1, 2026, outlining a strategic roadmap for India's economic future. Describing it as a 'Yuva Shakti-driven' budget, she emphasized that the proposals were guided by three core duties or 'kartavyas': accelerating sustainable economic growth, fulfilling the aspirations of the people, and ensuring equal access to opportunities for all citizens. The budget comes at a time when the Indian economy is projected to grow above 7%, and it aims to build on this momentum by focusing on manufacturing, infrastructure, and small and medium-sized enterprises (MSMEs).

The Six Pillars of Economic Intervention

The Finance Minister detailed a six-point agenda to drive growth. This comprehensive strategy includes scaling up manufacturing in seven strategic sectors, rejuvenating legacy industrial clusters, creating 'champion' MSMEs, delivering a powerful push for infrastructure, ensuring long-term economic security and stability, and developing vibrant city economic regions. A cornerstone of this plan is a significant increase in public capital expenditure, which has been raised to ₹12.2 lakh crore for the fiscal year 2026-27, signaling the government's commitment to investment-led growth.

Manufacturing at the Forefront

A central theme of Budget 2026 is a concerted effort to position India as a global manufacturing hub. Several key initiatives were announced to bolster domestic production capabilities across frontier sectors.

Biopharma SHAKTI: A new scheme, Biopharma SHAKTI, was launched with an outlay of ₹10,000 crore over five years. This initiative aims to build a robust ecosystem for the domestic production of biologics and biosimilars, addressing the rising burden of non-communicable diseases. The plan includes establishing three new National Institutes of Pharmaceutical Education and Research (NIPERs) and creating a network of over 1,000 accredited clinical trial sites.

Semiconductors and Electronics: Building on previous efforts, the government announced the second phase of the India Semiconductor Mission (ISM 2.0). The outlay for the Electronics Components Manufacturing Scheme has been substantially increased to ₹40,000 crore to deepen the value chain beyond final assembly. This move is designed to fortify supply chains and promote indigenous intellectual property.

Critical Minerals and Heavy Industry: To secure the supply of essential raw materials, the budget proposes the establishment of dedicated rare earth corridors in mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. Additionally, three dedicated chemical parks will be set up to reduce import dependency. The capital goods sector received a boost with the announcement of high-tech tool rooms and a ₹10,000 crore scheme for container manufacturing.

Empowering MSMEs and Traditional Industries

The budget recognizes the critical role of MSMEs and traditional sectors in the economy. A comprehensive package for the textile industry was unveiled, featuring a National Fibre Scheme, Mega Textile Parks, and the Mahatma Gandhi Gram Swaraj initiative to support Khadi and village industries. For MSMEs, the government announced a ₹10,000 crore SME Growth Fund to help promising firms scale up. The budget also plans to revive 200 legacy industrial clusters and has topped up the Self-Reliant India Fund with an additional ₹2,000 crore. Furthermore, the TReDS platform will be utilized for all purchases from MSMEs by central public sector enterprises to ensure timely payments.

Key Budget 2026 Allocations and Schemes

A Powerful Push for Infrastructure and Connectivity

Infrastructure development remains a top priority. The budget announced the development of seven High-Speed Rail corridors connecting major cities like Mumbai-Pune, Hyderabad-Bengaluru, and Delhi-Varanasi, terming them 'growth connectors'. The logistics network will be further strengthened with the establishment of Dedicated Freight Corridors and the operationalization of 20 new National Waterways over the next five years. The budget also includes schemes for promoting coastal cargo and developing a ship repair ecosystem.

Financial Sector Reforms and Tax Simplification

On the financial front, the government plans to set up a High-Level Committee to comprehensively review the banking sector. A review of the Foreign Exchange Management (Non-debt Instruments) Rules is also on the anvil. For individual investors, Persons Resident Outside India (PROI) will now be permitted to invest in listed Indian companies through the Portfolio Investment Scheme. In a move to simplify taxation, the budget proposes a new Income Tax Act to come into force from April 1, 2026, and a simplification of the TDS process for NRIs on property sales.

Other Sectoral Highlights

The budget also included a range of announcements for other sectors. To boost rural incomes, schemes for veterinary services, fisheries, and horticulture were introduced. In tourism, 15 archaeological sites, including Lothal and Sarnath, will be developed. The sports sector will be transformed through the Khelo India Mission. For social welfare, the Divyangjan Kaushal Yojana and Divyang Sahara Yojana were announced to support persons with disabilities.

Conclusion

Union Budget 2026 presents a clear and ambitious vision for India's economic trajectory. With its strong focus on capital expenditure, domestic manufacturing, and infrastructure, the government aims to create a self-reliant economy that is deeply integrated with global markets. The targeted support for MSMEs, traditional industries, and strategic sectors is designed to foster inclusive growth and generate employment. As these policies are implemented, the focus will be on execution to translate the budgetary allocations into tangible economic outcomes.