Budget 2026: Manufacturing at the Core, Sets ₹12.2 Trillion Capex Goal to Fuel ‘Viksit Bharat’

In a decisive move to transform India into a global manufacturing powerhouse, Finance Minister Nirmala Sitharaman’s Union Budget for 2026–27 has placed industrial resilience and MSMEs at the forefront of the national agenda. With a record public capital expenditure outlay of ₹12.2 lakh crore (representing a significant jump for FY27), the government is betting on high-tech ecosystems to drive the next phase of economic growth.

The ₹10,000 Crore MSME Pivot

Recognizing that the MSME sector is a critical pillar of the economy, the Budget revealed a dedicated ₹10,000 crore SME Growth Fund. This initiative is designed to create "future champions" by providing much-needed equity and liquidity to small players and helping them transition into export leaders.

To further strengthen the grassroots industrial base, the government announced the revival of 2,000 industrial clusters and an additional ₹2,000 crore top-up for the Self-Reliant India (SRI) Fund.

“Reviving 2,000 industrial clusters and setting up a ₹10,000 crore MSME growth fund is a very welcome signal. For many MSMEs, equity support and day-to-day liquidity are serious bottlenecks. If this fund translates into easier access to growth capital, it will lift the entire value chain,” said Jasraaj S Kalra, Managing Director, Noble Group. 

Dhaval Radia, CFO of ZEISS India, agrees that the Budget reinforces stability through its focus on infrastructure and fiscal discipline. “Union Budget 2026 reinforces stability at a time when global uncertainty remains elevated,” he says, adding, “The government’s continued focus on capital expenditure, infrastructure & logistics, tech-driven compliance, and fiscal discipline provides an important foundation for medium-term growth and investor confidence.” 

He notes that India’s next phase of value creation will increasingly depend on the competitiveness of its operating environment and the "predictability, simplification, and governance" of its policy frameworks.

Also read: Budget 2026: Sitharaman Flags Growth, Reform and Manufacturing Push

Electronics & Semiconductor Mission 2.0

Building on the success of the initial phase, the government launched India Semiconductor Mission (ISM) 2.0. While the first phase established a foundation, ISM 2.0 shifts focus to upstream capabilities, including semiconductor equipment manufacturing, material design, and the development of full-stack Indian Intellectual Property (IP).

• Financial Firepower: The outlay for the Electronics Components Manufacturing Scheme (ECMS) has been increased to ₹40,000 crore. This follows the scheme's massive success, which saw investment commitments nearly double its original targets.
• Employment and Production: This scheme alone is expected to generate over 50,000 jobs and has already attracted 46 applications with total investment commitments of ₹54,567 crore across 11 states.

The EV Revolution

To accelerate the transition to sustainable mobility and reduce import dependence, the Budget took a targeted approach to the EV supply chain:

• Cost Rationalization: A total of 35 capital goods used in EV battery manufacturing are now fully exempt from Basic Customs Duty (BCD). This move is expected to significantly lower the setup costs for domestic lithium-ion cell producers.
• Critical Mineral Sovereignty: In a major move to secure supplies, the FM proposed "Rare Earth Corridors" in mineral-rich states, including Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. These corridors will integrate mining, processing, and research to reduce reliance on global supply chains.

The recent budget announcements are a defining step forward for the electric vehicle industry in India, says Bhuvneshwar Pal Singh, Co-Founder and CFO at  MaxVolt Energy Industries Limited. He adds, “This forward-looking policy vision promotes innovation, attracts sustainable investment, and helps manufacturers scale up. This forward-looking approach fuels innovation, attracts investment, and empowers manufacturers to scale responsibly, ultimately driving economic growth while advancing our shared commitment to a greener future.” 

Building Industrial Resilience

The Budget also introduced "Corporate Mitras," a cadre of professionals such as CAs and Company Secretaries, to help MSMEs navigate complex compliance and regulatory processes at affordable costs. Furthermore, to attract global capital, the Budget raised foreign portfolio investment limits to 10%, making it easier for international investors to fund large-scale industrial projects.

The Macro Picture: 

• GDP and Growth: These reforms come at a time when India’s GDP growth for FY26 is estimated at 7.4%, with manufacturing showing strong momentum at 8.4% growth in the first half of the year.
• Trade Balance: By incentivizing local production, India aims to reduce its $120 billion annual electronics import bill and position itself as a reliable global production hub.

Fiscal Strength: The government's confidence is backed by robust tax collections; total gross GST revenue hit ₹18.43 lakh crore for the April–January period, marking an 8.3% year-on-year growth.

Also read: Budget 2026: No Changes In Income Tax Slab; New IT Act From April 1