According to the new budget, India aims to position itself as one of the leading global manufacturing hubs. The government’s package includes significant investments in key sectors such as biopharmaceuticals and semiconductors, as well as support for small businesses. However, experts believe that around $630 billion may not be enough, as the country needs to find new markets to expand trade. This was reported by SCMP.
Finance Minister Nirmala Sitharaman presented initiatives that analysts believe will help address two key issues: creating jobs for the youth - the largest demographic in the world - and leveraging free trade agreements to significantly boost exports.
Among the main budget expenditures are 100 billion rupees (approximately $1 billion) for the development of biopharmaceuticals, a similar amount for container production, and 50 billion for semiconductors and displays. Overall, the budget has increased by 7.7% compared to the previous year.
Sitharaman noted that the government plans to develop manufacturing in seven strategically important sectors, including biopharma, the semiconductor industry, electronic components, and rare earth magnets. The creation of three chemical manufacturing parks is also planned to reduce dependence on imports.
Additionally, the authorities announced the restoration of 200 industrial clusters to enhance their efficiency, the establishment of five regional medical centers to develop medical tourism and healthcare, as well as the construction of five university campuses near industrial corridors.These measures are expected to help bring the country closer to its goal of increasing the share of manufacturing in GDP to 25%, while the current figure stands at around 16-17%.
Saurabh Agarwal, a partner at consulting firm EY India, noted that the federal budget emphasizes transforming the country into a global manufacturing powerhouse.
While there is growth in investments in certain sectors, contributing to increased exports of smartphones and cars, India faces stiff competition from smaller countries, especially in electronics and textiles.
Over the past decade, clothing exports from India have significantly lagged behind those of Bangladesh, Vietnam, and other Asian competitors. The main reasons are high labor costs, lower production volumes, and lack of duty-free access to key markets.
Moreover, the budget includes 120 billion rupees through two specialized funds to support micro, small, and medium enterprises with the aim of creating "champion companies."
Manoj Purohit, a partner at BDO India, believes that additional business support measures will help attract investments.
Government capital expenditures have also increased to 12.2 trillion rupees (approximately $133.1 billion) from the previously revised 11 trillion amid cautious private investor sentiment. Last year, New Delhi reduced tax incentives aimed at stimulating consumption to protect the economy from high tariffs imposed by the U.S.
The Indian economy is showing resilience even with U.S. tariffs up to 50% and is projected to grow by 7.4% in the fiscal year ending in March 2026.
Christian de Guzman, senior vice president at Moody's Ratings, stated that India's sovereign credit profile will generally remain stable after the budget is adopted.
However, support measures, including the Goods and Services Tax (GST) reform, may lead to a decrease in tax revenues and increase the debt burden, the expert notes.
Bishwajit Dhar, a professor of economics at the Council for Social Development in Delhi, emphasizes that new measures alone are insufficient for significantly accelerating industrial growth, especially in the small and medium business sector.
There are already existing programs to stimulate manufacturing, such as the Make in India initiative launched in 2014, and the Production Linked Incentive scheme of 2020, which offers financial incentives for local manufacturers.
He also called for greater clarity in new initiatives to avoid confusion among investors involved in previous projects.
According to him, while business support is extremely important, the sector needs a new institutional framework to address systemic issues, as many companies lack collateral assets to secure loans. Estimates suggest that over 90% of Indian enterprises fall into this category.
Dhar added that more attention needs to be paid to boosting demand to attract private investments.
In the new budget, the government announced its intention to implement phased reforms, including creating a more favorable environment for foreign investments, which could further promote growth in the industrial sector.
