Budget 2026 is on the horizon, and its role in shaping India's trade policy is under close scrutiny, especially considering the current global economic landscape. As the world grapples with fluctuating trade volumes, rising trade barriers, and geopolitical uncertainties, India needs a strategic budget to navigate these challenges and secure its position in the global market. The budget should aim to strike a balance between promoting growth, ensuring supply chain resilience, and enhancing competitiveness.

Strategic Trade Agreements

India has been actively pursuing Free Trade Agreements (FTAs) to diversify its markets and reduce reliance on any single region. Agreements with countries like Australia, New Zealand, Oman, and the UK are expected to provide access to diverse markets. The upcoming budget can further support these initiatives by allocating resources for negotiating new trade deals and effectively implementing existing ones. The India-EU trade agreement, expected to be signed soon, is particularly significant, potentially becoming the EU's largest trade deal. These agreements typically aim to lower or eliminate customs duties, improve regulatory alignment, and facilitate market access.

Boosting Domestic Manufacturing

Trade liberalization alone is insufficient to drive exports without adequate domestic production capacity. The Production-Linked Incentive (PLI) schemes, launched in 2020-21, aim to transform India from an import-dependent to an export-oriented manufacturing economy. Sectors like electronics, automobiles, pharmaceuticals, and solar modules are expected to reach optimal production capacity. Budget 2026 can play a crucial role by providing financial support and incentives to further boost these schemes and enhance manufacturing competitiveness.

Reforming Customs and Tariffs

India's customs regime has become complex over time, with multiple duty slabs and exemptions. This complexity leads to disputes, delays, and increased costs for businesses. The budget can address this by simplifying customs procedures, rationalizing tariff structures, and implementing a GST-style amnesty scheme to resolve pending disputes. The Global Trade Research Initiative (GTRI) has proposed a comprehensive overhaul of India's import tariff structure and customs administration to reduce trade costs and enhance manufacturing competitiveness. Deloitte India has also emphasized the need for smarter import duty reforms to strengthen domestic manufacturing and boost exports.

Addressing Trade Deficit and Promoting Exports

India's trade deficit widened in December 2025, driven by rising imports. The budget needs to include measures to promote exports and reduce the trade gap. This can be achieved through export promotion schemes like the Market Access Initiative (MAI), which helps strengthen export infrastructure and expand exporters' global reach. The government is also focused on simplifying trade processes and providing easy access to export credit for MSMEs.

Navigating Global Uncertainties

The global trade landscape is fraught with uncertainties, including tariff escalations, geopolitical risks, and slowing global growth. The budget should aim to build resilience by diversifying markets, promoting value-added exports, and strengthening supply chains. Encouraging greater digitization and the use of technology can also improve end-to-end visibility and help businesses foresee and mitigate potential disruptions.

Budget 2026 presents a crucial opportunity for India to fine-tune its trade policies and strategies. By focusing on strategic trade agreements, boosting domestic manufacturing, reforming customs and tariffs, addressing the trade deficit, and navigating global uncertainties, India can strike the right balance and secure its position as a competitive player in the global trade arena.