India’s Union Budget 2026-27, presented on 1 February 2026 by Finance Minister Nirmala Sitharaman, underscored a concerted effort to propel manufacturing and boost the micro, small, and medium enterprises (MSME) ecosystem — two engines seen as vital for sustainable and inclusive economic growth.
Manufacturing: A Core Growth Driver
A major highlight is the expansion of the India Semiconductor Mission 2.0, with additional budgetary support of ₹10,000 crore, building on the earlier phase. This initiative builds on the success of the original mission, with a sharper focus on producing equipment, materials, and full-stack Indian intellectual property, as well as strengthening supply chains and boosting industry-led research and training.
Complementing the semiconductor thrust, the Budget also enhanced allocations under the Electronics Components Manufacturing Scheme (ECMS) to attract investment in electronic parts and related value chains. Scalability in electronics manufacturing is now linked with establishing high-tech tool rooms and specialised manufacturing clusters — steps intended to bring more domestic value addition and scale in production base.
In addition to electronics, the Budget proposes targeted support for other manufacturing segments through the establishment of three dedicated chemical parks designed on a plug-and-play model, and the launch of programmes in sectors such as biopharma, textiles, and sports goods. For instance, the Biopharma Shakti programme aims to enhance India’s manufacturing footprint in pharmaceuticals and healthcare-related biotech, recognizing the sector’s strategic value.
Capital Expenditure and Infrastructure for Industry
Robust infrastructure remains a backbone for manufacturing growth. The Budget has allocated ₹12.2 lakh crore in capital expenditure for FY 2026-27, an increase of roughly 8.8% over the previous fiscal, aimed at sharpening logistics, power, transport, and industrial infrastructure. These investments are designed to reduce supply chain bottlenecks and unlock productivity improvements, particularly for manufacturing firms operating across urban and semi-urban clusters.
The Budget also highlights the development of 200 legacy industrial clusters, set to be rejuvenated through infrastructure upgrades and technology adoption, which is expected to reduce entry costs for new enterprises and improve competitiveness for existing manufacturers.
MSME Sector: Championing Small and Medium Enterprises
The MSME sector — often described by policymakers as the “second engine” of economic growth — received targeted support in Budget 2026. Recognising the sector’s role in employment, exports, and value addition, the Finance Minister unveiled a dedicated ₹10,000 crore SME Growth Fund. This fund is intended to scale promising SMEs by providing equity backing based on clearly defined performance criteria that emphasise scale, efficiency, and technology adoption.
To further extend risk capital access, the government has also topped up the Self-Reliant India Fund by an additional ₹2,000 crore. Together, these funds aim to bridge the historic capital gap faced by small enterprises, enabling them to transition from micro and small sizes into mid-market players with stronger global linkages.
Additionally, the Budget proposes liquidity support through enhancements to the Trade Receivables Discounting System (TReDS) platform — a digital system that accelerates receivables realisation for MSMEs, thereby easing working capital crunches. Integration with the Government e-Marketplace (GeM) and expanded credit guarantee frameworks further improve the ease of doing business for smaller firms.
Professional support mechanisms such as “Corporate Mitras” — to provide modular training and advisory services — signal a shift toward capacity building and governance strengthening within MSMEs. This is particularly significant in raising managerial and compliance standards, thus enhancing competitiveness.
Sectoral Integration and Long-Term Vision
The Budget’s manufacturing thrust is not just about capital inputs; it lays a strategic framework for integrating sectors across technology, raw materials, and skills development. Support for rare earth corridors in mineral-rich states like Odisha, Kerala, Tamil Nadu, and Andhra Pradesh — designed to nurture mining-to-manufacturing ecosystems — reflects this integrative approach.
Furthermore, initiatives such as textile parks, technical textile programmes, and sports goods manufacturing reinforce the government’s commitment to labour-intensive industries that can generate significant employment while boosting exports.
A Blueprint for Industrial Transformation
The Union Budget 2026-27 presents a robust blueprint for manufacturing and SME growth, combining financial incentives, infrastructure investment, skill development, and ecosystem building. By aligning fiscal policy with industrial strategy, India is positioning itself to capture global manufacturing opportunities, transition up the value chain, and ensure that both large domestic players and small enterprises benefit from a competitive, integrated growth environment.
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