Union Budget 2026-27 Looks To Balance Manufacturing Push With Export Growth

By Saurabh Shukla

New Delhi: In the upcoming Union Budget 2026-27 government is expected to not only focus on strengthening domestic manufacturing but also give a push to exports. Ongoing trade negotiations with the EU and US, along with agreements with the UK, Oman and New Zealand, signal a clear effort to diversify markets and reduce reliance on any single economy. Experts and stakeholders told ETV Bharat that Customs duties are also likely to be rationalised, while measures to support consumption and boost investment could underpin broader economic growth.

Stakeholders believe that the Budget is also expected to provide targeted support for high-growth sectors such as electronics, pharmaceuticals, engineering goods, and digitally delivered services. With global trade increasingly shaped by standards, reliability and digital readiness- initiatives that make it easier for Indian exporters to meet international requirements are likely to feature prominently. Overall the focus appears set on improving India’s competitiveness abroad while strengthening domestic industries in a challenging global trade environment.

Tax relief, liquidity support needed

Talking to ETV Bharat Chairman, Apparel Export Promotion Council (AEPC), Dr A Sakthivel told ETV Bharat that the Apparel Export industry has urged the government to use the upcoming Budget to ease costs, improve liquidity and restore competitiveness in the labour-intensive apparel sector. Key demands include bringing back the 15 per cent concessional corporate tax rate for new manufacturing units, offering accelerated depreciation on capital investments to free up cash for reinvestment, and immediately reinstating the Interest Equalisation Scheme to help MSME exporters compete with lower-cost countries.

He also stressed that there is a need for changes to concessional import rules to make them more flexible, especially for accessories and intermediate suppliers and for adjusting GST on garments so that the 18 per cent rate applies only to luxury apparel. At a structural level, the council has sought policy support to help the industry adapt to global shifts.

This includes setting up a Green Transformation Fund to finance ESG compliance at affordable rates, easing rules for e-commerce exports and promoting domestic manufacturing of textile machinery through tax incentives and lower GST. AEPC has also recommended reducing customs duties on man-made fibre yarns to boost exports and harmonising GST rates on textile job work services. Together, these measures aim to lower input costs, unlock working capital, support sustainability and help Indian apparel exporters remain competitive in global markets, added Dr Sakthivel.

Tax, Logistics Relief for Exporters

Ahead of the Union Budget 2026, the Federation of Indian Export Organisations (FIEO) has called for a focused set of fiscal and policy measures to address rising costs, improve competitiveness and strengthen the country’s export ecosystem. Presenting the recommendations, FIEO President S C Ralhan stressed the urgent need to correct inverted customs duty structures that raise input costs for exporters. He said higher duties on raw materials and components than on finished goods continue to hurt sectors such as textiles, electronics, chemicals, plastics, leather and footwear- eroding competitiveness and locking up working capital. Rationalising these duties, he said that it would lower production costs, encourage domestic value addition and make Indian exports more competitive.

FIEO has also flagged India’s heavy reliance on foreign shipping lines as a major vulnerability, urging the government to support the development of Indian global-scale shipping carriers through long term finance and regulatory support. According to the exporters, a strong domestic shipping ecosystem could cut freight costs. Also it would reduce disruptions and save up to 40 to 50 billion US dollars annually in freight outflows. On the tax front, FIEO has sought the restoration of the 200–250 per cent weighted tax deduction for in-house R&D and its extension to MSMEs and non-corporate entities, arguing that innovation incentives are critical as global competition intensifies.

It has also proposed enhanced tax deductions for overseas marketing and branding to help Indian exporters, especially MSMEs, expand their global footprint. Besides these FIEO has also called for extending the 15 per cent concessional corporate tax rate for new manufacturing units to attract investment, support Make in India and reinforce export led growth.

Duty Reforms, R&D Push in Budget

While commenting on the tax structure, chartered accountant DK Mishra told ETV Bharat that the government has taken several steps to boost consumption and support domestic manufacturing by rationalising GST rates in September last year. In the future, he also expects the government to consider further duty rationalisation and structural reforms in customs, particularly to make the import of key raw materials cheaper for the domestic industry as well as exporters.

He also believes that research and development will be a key focus area this time, with the government likely to encourage the design of new products for global markets and expansion into new export areas. D K Mishra added that India still has many resources that remain underexplored, and greater focus on these could help meet domestic demand while also strengthening overseas supply.