Written by Saurabh Agarwal and Parul Nagpal
India’s manufacturing is gathering pace, with recent data showing factories as a central pillar of growth, meeting domestic demand and strengthening the country’s role in global value chains. Over the last ten years, manufacturing output has grown by about 6% a year and is now worth more than $450 billion. But its share in India’s economy has stayed almost the same, at around 15–17% of GDP.
The next Budget must therefore focus on outcomes by sharpening policy measures that directly enhance scale, competitiveness and cost efficiency in domestic manufacturing.
PLIs and the investment push
The Production-Linked Incentive (PLI) scheme has been the biggest driver so far. The government has set aside about ₹2.9 lakh crore for PLIs across 20 sectors. By March 2025, the scheme had drawn large private investment, produced more than five times the scheme’s cost in extra output, and created nearly 12 lakh jobs.
Electronics is the best example: production has expanded about sixfold in a decade, making India the world’s second-largest mobile phone manufacturer. Mobile exports have risen about 127 times since FY2014–15, while imports have sharply declined.
Budget 2026–27 can build on this by extending PLI tenures, expanding eligible products list and allowing fresh applications in sectors such as smartphones, solar, white goods, auto, food, etc. Further, introducing new PLI schemes in sectors such as EV charging equipment, heavy construction machinery, battery echo system, semi-conductor echo system, speciality chemicals, etc and releasing the second version of next-generation PLIs for semi-conductors, green hydrogen and lithium-ion cells can do a long way in making our economy self-sustainable in the era of global tensions.
Phased tariff strategy and quality guardrails
India’s measured tariff policy has helped industries scale efficiently. Duties have been raised in phases — first on finished goods, then components, and finally on raw material. Further, once the domestic manufacturing builds the capacity, the duty on finished goods and components is tapered down significantly to provide a level playing field to foreign manufacturers and protect the interest of domestic consumers.
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This “glide path” approach has provided adequate protection and has a proven result in establishing manufacturing capabilities in various sectors like, automotive, mobile phones, solar modules, etc.
The Budget can take this forward by implementing a similar approach in sectors where the PLI schemes have already been rolled out and in the sectors where the government believes to be of national importance such as defence and aviation.
Quality measures have also expanded over a period and have acted as a non-tariff barrier – at the same time these measures have helped in ensuring that cheap quality products are not dumped by the foreign and Indian manufacturers in our markets. Mandatory Indian standards under Quality Control Orders (QCOs) increased from 80+ products in 2019 to 750+ products as on date.
The next step could be a multi-year standards roadmap and more accredited testing labs, helping India meet global quality norms as we export into newly developed export markets, while supporting domestic manufacturing.
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GST 2.0 and Customs Modernization
Indirect tax reforms are improving ease of business. The “next-gen” GST reforms (effective September 2025) simplified rate structures and reduced taxes on many goods. This has lowered industry costs and expanded the tax base: registered taxpayers increased from 66.5 lakh in 2017 to 1.51 crore in 2025. FY2024–25 recorded gross GST collections of ₹22.08 lakh crore. The Budget can further solidify these gains by implementing similar reforms in Customs.
On the Customs side, digital trade facilitation is advancing rapidly. CBIC’s SWIFT 2.0 — a unified single-window platform — will allow importers and exporters to obtain all approvals online. Integrating agencies like FSSAI and plant/animal quarantine into one portal will cut delays and reduce the paperwork burden. Along with faceless assessment and risk-based inspection, these measures will lower logistics costs and strengthen competitiveness for manufacturing exporters.
Manufacturing momentum and global integration
India’s manufacturing strategy is now focused on scale, domestic value addition and stronger global value-chain integration, supported by initiatives like the National Manufacturing Mission (2025) and the National Critical Minerals Mission which aim to build upstream capabilities from rare-earth magnets to batteries. Budget 2026–27 can accelerate this shift by boosting R&D, expanding Skill India programmes and strengthening industrial infrastructure.
India is gradually aligning its tax, tariff and regulatory rules to better match what industry needs. This is helping the country strengthen its place in global supply chains. With manufacturing improving, exports at record highs and strong foreign investment, these steps could take Make in India to its next phase — bigger scale, better quality, and stronger global competitiveness.
The writers are Tax Partners, EY India
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