Budget 2026: Taxation Done, Manufacturing Boost Next? Experts Weigh In

As India heads into Union Budget 2026, expectations across industry and markets suggest a decisive pivot may be underway. With personal income tax reforms largely addressed in recent budgets and capital expenditure already at elevated levels, manufacturing is increasingly being seen as the next frontier for policy action.

Industry leaders argue that the focus must now move beyond capacity creation to technology depth, export competitiveness, logistics efficiency, and value-chain integration, especially as India positions itself as a global manufacturing alternative amid supply-chain realignments.

How Previous Budgets Shaped India’s Manufacturing Push

Over the past five years, manufacturing policy has been shaped less by standalone budgetary allocations and more by targeted incentive frameworks and sustained public investment. The centrepiece of this approach has been the Production Linked Incentive (PLI) schemes, with a cumulative approved outlay of ₹1.97 lakh crore across 14 sectors, ranging from electronics and automobiles to pharmaceuticals, solar modules, and advanced batteries.

Alongside this, the government sharply increased capital expenditure, rising from ₹4.39 lakh crore in FY21 to over ₹11 lakh crore by FY25, indirectly boosting manufacturing demand across steel, cement, capital goods, defence production, and energy equipment. While manufacturing rarely appeared as a single consolidated budget headline, sector-specific incentives, customs duty tweaks, and logistics reforms played a defining role in shaping industrial outcomes.

Automation and Robotics: India’s Emerging Export Story

Industry leaders believe the next phase of manufacturing growth will be led by automation, robotics, and intelligent factory solutions, particularly for export-oriented units.

Srinivas Choudhary, Founder & CEO of Alligator Automations, says India’s automation and robotics exports are entering a high-growth phase. “The industrial automation and robotics industry’s export volume is expected to grow at a CAGR of 18–22% and reach USD 15–18 billion by 2027,” Choudhary says.

He adds that Indian firms are increasingly being recognised not just as cost-effective suppliers, but as trusted end-to-end technology partners, executing turnkey automation projects, robotic end-of-line solutions, machine vision systems, and AI-led quality inspection tools.

Automobiles, FMCG, pharmaceuticals, and electronics together account for 65–70% of current export demand for automation solutions, reflecting the broadening industrial base.

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AI Moves From Add-On to Core Manufacturing Tool

Artificial intelligence is fast becoming central to factory operations rather than a peripheral add-on. According to Choudhary, AI-enabled manufacturing solutions, including predictive maintenance, real-time monitoring, and intelligent decision-making, are already delivering 10–15% improvements in overall equipment effectiveness. “Export-oriented manufacturing units are leading the adoption curve, and robot density is expected to rise beyond past levels,” he says.

Industry leaders believe Budget 2026 could accelerate this trend through R&D tax incentives, accelerated depreciation for Industry 4.0 investments, export-linked PLIs for automation hardware and software, and dedicated skilling programmes for robotics and AI.

Why Logistics Costs Are Now a Manufacturing Issue

Competitiveness in manufacturing, experts stress, cannot be separated from logistics efficiency. Soham Chokshi, Co-founder & CEO of Shipsy, says Budget 2026 must address this linkage head-on. “A decisive focus on lowering logistics costs is essential to making Indian manufacturing globally competitive,” Chokshi says.

He adds that integrating infrastructure investment with AI-led optimisation across supply chains, production planning, and freight movement can unlock productivity gains, reduce systemic inefficiencies, and strengthen export performance, a critical requirement if India is to move up global manufacturing rankings.

The Push for Design-Led Electronics

Electronics manufacturers are calling for a shift from assembly-led growth to original design manufacturing (ODM) and IP creation. Shishir Gupta, Co-founder & CEO of Oakter, says Budget 2026 should reinforce India’s ambition to become a global electronics innovation hub. “Design-linked incentives, deeper component localisation and refined PLI support for batteries, power electronics, IoT hardware and semiconductor-linked supply chains are critical,” Gupta says.

He also highlights the need for stable GST structures, faster input tax credit refunds, and infrastructure support for automated factories, arguing that these measures would allow Indian firms to move up the value chain and compete globally with IP-driven products.

Customs, Compliance, and Predictability for High-End Manufacturing

From the perspective of precision and high-end manufacturing, policy predictability matters as much as incentives. Dhaval Radia, Chief Financial Officer at ZEISS India, points to the need for customs and regulatory clarity. “Addressing inverted duty structures and ensuring a predictable import framework will be critical for improving cost competitiveness and long-term investment planning,” Radia says.

He adds that fewer licences, simplified approvals, and faster clearances for non-sensitive technology-intensive imports could significantly improve India’s attractiveness as a manufacturing base. Radia also flags the importance of Global Capability Centres (GCCs) focused on engineering, deep tech, and R&D, calling for rationalised transfer pricing norms and improved infrastructure in GCC hubs.

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Sustainability and the Circular Manufacturing Opportunity

Sustainability is emerging as a parallel priority in manufacturing. Mahadev Chikkanna, Founder & CEO of MYNUSCo, notes that India generates over 500 million tonnes of crop waste annually, much of which is burnt, contributing to pollution.“Targeted R&D tax credits, export incentives for bio-based products, and support for scaling bio-manufacturing infrastructure can unlock rural income opportunities and accelerate the transition to circular materials,” he says.

Industry leaders argue that Budget 2026 could position India as a leader in climate-friendly manufacturing, aligning economic growth with environmental goals.

Why Budget 2026 Could Be a Turning Point?

After five years of manufacturing capacity building through ₹1.97 lakh crore in PLI commitments and a near tripling of capital expenditure, the industry now expects Budget 2026 to sharpen its focus. The next phase, experts say, will be defined by automation, AI adoption, logistics efficiency, design-led manufacturing, and sustainability, rather than headline spending alone.

The policy signals sent in this Budget could determine whether India’s manufacturing sector merely scales volume or decisively moves up the global value chain.

Year-by-Year Budgetary Spend and Policy Push

FY2021 (Budget 2020–21):

Direct manufacturing-specific allocations were limited in FY21 as the government prioritised fiscal stability amid a slowing economy. Total capital expenditure stood at ₹4.39 lakh crore, with manufacturing support largely routed through defence procurement, railways, and public infrastructure rather than standalone industrial spending. This year focused more on policy reset than a fresh fiscal push.

FY2022 (Budget 2021–22):

Manufacturing received a decisive boost with the formal rollout of Production Linked Incentive (PLI) schemes, covering multiple sectors. While annual outgo was staggered, the approved cumulative PLI outlay was pegged at ₹1.97 lakh crore over five years. Capital expenditure rose sharply to ₹5.54 lakh crore, creating demand for core manufacturing sectors such as steel, capital goods, and heavy engineering.

FY2023 (Budget 2022–23):

The manufacturing ecosystem benefited from a 35% jump in capital expenditure to ₹7.50 lakh crore. Additional PLI approvals were announced for solar PV modules, advanced chemistry cell batteries, and automobiles, reinforcing domestic manufacturing in clean energy and mobility. Budgetary support focused on scale and localisation rather than subsidies.

FY2024 (Budget 2023–24):

Capital expenditure was raised further to ₹10 lakh crore, with manufacturing gains driven by infrastructure, defence production, and logistics development. No major expansion in PLI size was announced, signalling a shift towards implementation and utilisation of existing schemes. MSMEs and manufacturing-linked exporters benefited from credit support measures.

FY2025 (Budget 2024–25):

In the pre-election year, the government sustained its manufacturing push indirectly by raising capital expenditure to over ₹11 lakh crore. The emphasis remained on execution of existing PLI commitments, defence indigenisation, and large public works, rather than new incentive schemes. Manufacturing policy entered a consolidation phase. 

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