Budget provides big boost to manufacturing, from rare earths to textiles

The Budget on Sunday sought to give a big boost to the country's manufacturing ecosystem by focusing on seven 'strategic and frontier sectors' including rare earth magnets, textiles, semiconductors, and containers. Scaling up of manufacturing is one of the three 'Kartavya' announced by Finance Minister Nirmala Sitharaman in her ninth Budget speech to achieve the goal of ''Viksit Bharat' by 2047. The seven sectors are pharmaceuticals, semiconductor, electronic components, Rare Earth Permanent Magnets, chemicals, capital goods, and textiles. Manufacturing is apparently the running theme of the Budget 2026-27 as the word was mentioned at 24 places in the speech. The Budget has allocated Rs 20,000 crore for Biopharma SHAKTI (Strategy for Healthcare Advancement through Knowledge, Technology and Innovation) and container manufacturing ecosystem. BIOPHARMA SHAKTI: To develop India as a global Biopharma manufacturing hub, the government proposed the Biopharma SHAKTI with an outlay of Rs 10,000 crore over the next five years. INDIA SEMICONDUCTOR MISSION 2.0: It will be launched to produce equipment and materials, design fullstack Indian IP (intellectual property) , and fortify supply chains. Focus will also be there on industry led research and training centres to develop technology and skilled workforce. ELECTRONICS: The electronics components manufacturing scheme, launched in April 2025 with an outlay of Rs 22,919 crore, already has investment commitments at double the target. The government proposed to increase the outlay to Rs 40,000 crore. RARE EARTH PERMANENT MAGNETS: It was announced to support the mineral-rich states of Odisha, Kerala, Andhra Pradesh and Tamil Nadu to establish dedicated rare earth corridors to promote mining, processing, research and manufacturing. Just to add, Kerala and Tamil Nadu are among the states set for polls in the coming months. The move is important as China, which is a major player in this segment, has imposed export restrictions that have led to disruptions in the domestic auto industry. CHEMICALS: To enhance domestic chemical production and reduce import dependency, a scheme will be launched to support states in setting up three dedicated chemical Parks, through challenge route, on a cluster-based plug-and-play model. CAPITAL GOODS: To build India's capacity in the sector, the finance minister announced setting up of Hi-Tech Tool Rooms by CPSEs at two locations as digitally enabled automated service bureaus that locally design, test, and manufacture high-precision components at scale and at lower cost. A scheme for Enhancement of Construction and Infrastructure Equipment (CIE) will be introduced to strengthen domestic manufacturing of high-value and technologically-advanced CIE. This can range from lifts in a multi-story apartment, fire-fighting equipment, large and small, to tunnel-boring equipment for building metros and high-altitude roads. A scheme was also proposed for container manufacturing with a budgetary allocation of Rs 10,000 crore over a five year period. TEXTILES: For the sector, an integrated programme with five sub-parts was announced. It includes National Fibre Scheme, Textile Expansion and Employment Scheme, and National Handloom and Handicraft programme. Sitharaman also said that India has the potential to emerge as a global hub for high quality, affordable sports goods. ''I propose a dedicated initiative for sports goods that will promote manufacturing, research and innovation in equipment design as well as material sciences,'' she said. She said that to enhance last-mile and remote connectivity, and promote tourism, incentives will be given to indigenize manufacturing of seaplanes. ''To harness the efficiency of just-in-time logistics for electronic manufacturing, I propose to provide safe harbour to non-residents for component warehousing in a bonded warehouse at a profit margin of 2 per cent of the invoice value,'' she said. The resultant tax of about 0.7 per cent will be much lower than in competing jurisdictions. Similarly to provide fillip to toll manufacturing, the minister proposed to provide exemption from income tax for five years, to any non-resident who provides capital goods, equipment or tooling, to any toll manufacturer in a bonded zone. Further the Budget announced further simplification of the tariff structure to support domestic manufacturing, and promote export competitiveness. ''I propose to extend the basic customs duty exemption given to capital goods used for manufacturing Lithium-Ion Cells for batteries, to those used for manufacturing Lithium-Ion Cells for battery energy storage systems too,'' she said. A National Mission on Manufacturing (NMM) has set ambitious targets to double the manufacturing sector's contribution to GDP to 25 per cent by 2035 from 12.9 per cent, while generating 143 million jobs, according to the Economic Survey. The mission was announced in the Union Budget 2025-26. Commenting on the Budget, Commerce and Industry Minister Piyush Goyal said that the Budget measures will help boost domestic manufacturing and exports. Amardeep Singh Bhatia, Secretary, Department for Promotion of Industry and Internal Trade (DPIIT) said the budget continues with the trajectory to help meet the goal of Viksit Bharat by focusing on deepening reforms and further supporting manufacturing growth. ''A number of schemes have been announced for this. These will deepen the domestic value chains across sectors as well as integrate them with global value chains,'' he said adding the announcements will lead to increasing productivity of the Indian economy and improve infrastructure.