India's upcoming budget is expected to significantly impact the nation's industrial policy, with a strong emphasis on boosting the manufacturing sector. Industry leaders are advocating for policy continuity, enhanced execution capabilities, and measures to stimulate domestic demand, all of which are crucial for fostering a robust manufacturing ecosystem and enhancing India's global competitiveness.
The manufacturing sector is viewed as a central growth engine for realizing India's vision of becoming a developed nation. To this end, sustained policy support for initiatives like Production Linked Incentive (PLI) schemes and the National Manufacturing Mission (NMM) is considered essential. Announced in the Union Budget 2025-26, the NMM represents a foundational policy blueprint for accelerating India's industrial growth and global competitiveness over the next decade. The mission has set ambitious targets for 2035, aiming to double the manufacturing sector's contribution to GDP from 12.9 percent in 2023 to 25 percent, generate 143 million jobs, and boost merchandise exports to USD 1.2 trillion through deeper integration into global value chains. The NMM adopts a two-pronged approach, dedicating major focus to sector-specific interventions across 20-30 prioritized industrial clusters.
A critical aspect of strengthening the manufacturing sector involves improving access to credit for Micro, Small, and Medium Enterprises (MSMEs). The Union Budget 2025-26 allocated a fund of Rs 23,168 crore to the Ministry of Micro, Small and Medium Enterprises, reflecting a 4.6% increase over the previous budget. It is expected that these increments will improve efficiency, technological adoption, and employment generation. Exporter MSMEs will also benefit from term loans of up to Rs 20 crore with enhanced guarantee cover. Furthermore, the government will introduce customized credit cards with a Rs 5 lakh limit for registered MSMEs.
Infrastructure development remains a key priority, given its significant multiplier effect on economic growth. Enhanced funding support for states is expected to accelerate rural road and water projects, further stimulating demand and creating employment opportunities. In light of challenging global trade conditions, industry experts also emphasize the importance of WTO-compliant export incentives and better utilization of Free Trade Agreements (FTAs) to bolster India's export competitiveness.
Stimulating domestic demand is another crucial element for a growth-oriented budget. Simplified taxation and easier access to credit are expected to create a strong manufacturing multiplier effect across investment and employment. A rationalization of the Goods and Services Tax (GST) across home and kitchen appliances could encourage a shift towards branded, efficient products, further boosting the manufacturing sector.
The National Manufacturing Policy has evolved into the new National Manufacturing Mission, announced in Union Budget 2025-26, which focuses on five key areas: ease and cost of doing business, a future-ready workforce, vibrant MSMEs, access to technology, and quality manufacturing. The mission also seeks to build clean-tech ecosystems across solar PV cells, EV batteries, electrolyzers, wind turbines, and grid-scale batteries.
