Business
Budget 2026: Deepening domestic manufacturing capabilities, expanding global reach – The Times of India
By Neetu VinayekIndia’s effort to strengthen its manufacturing foundation has steadily progressed over the past decade through a series of significant policy measures. A major milestone was the launch of the Make in India initiative in 2014, designed to encourage investment, spur innovation, and improve ease of doing business. Labour reforms also moved forward with the rollout of the four Labour Codes on 21 November 2025, merging 29 Central labour laws to streamline compliance and create a modern, resilient workforce framework. Complementing these domestic reforms, India has simultaneously intensified its global trade engagement through a renewed focus on Free Trade Agreements (FTAs). Together, these reforms laid the foundation for the renewed manufacturing push outlined in Union Budget 2026.The Budget 2026 places manufacturing as a strategic and frontier sector for sustaining economic growth. The government framed the Budget as a continuation of structural reforms aimed at improving productivity, boosting competitiveness, and strengthening resilience against global disruptions.
In light of the rapid progress under the Electronics Components Manufacturing Scheme, the Budget proposes expanding its allocation to ₹40,000 crore, reaffirming India’s ambition to enhance domestic value addition and secure its place in global electronics supply chains. To compliment this, income tax holiday is being provided for five years to non-residents providing capital goods, equipment, or tooling to contract manufacturer operating in customs-bonded zones. This will help reduce costs which were being incurred on specialised equipment. Safe harbour provisions have been extended to non-residents for component warehousing in a bonded warehouse at a profit margin of 2 percent of the invoice value with a resulting tax incidence of 0.7 percent. This will harness efficiency of just-in-time logistics for the sector.A key highlight is the India Semiconductor Mission (ISM) 2.0, to produce equipment and materials, design full-stack Indian IP, and fortify supply chains signalling the country’s ongoing commitment to building a robust domestic semiconductor ecosystem. There is tremendous potential for the aviation sector with rise in airports and regional connectivity under the UDAN schemes. To build sustainable ecosystem it is important to manufacture aircrafts and undertake MRO activities within the country. With this vision basic customs duty is exempted on parts and components imported for manufacture of aircraft. Further, basic customs duty on raw materials imported for manufacture of parts used in maintenance, repair or overhaul requirements in defence units is also exempted. The government has also proposed a seaplane VGF scheme to support operations and indigenise manufacturing of seaplanes.A Scheme for Rare Earth Permanent Magnets, launched in late 2025, is now complemented by proposed support for Rare Earth Corridors across mineral-rich states to promote mining, processing, research and manufacturing.The Budget also introduces Biopharma SHAKTI—a five-year, ₹10,000 crore programme to position India as a global hub for biopharma manufacturing by strengthening capabilities in biologics and biosimilars.To boost the chemicals sector, the government has launched a scheme supporting States in developing chemical parks to expand domestic production. The capital goods sector, often the silent driver of productivity, receives a comprehensive support package. This includes the establishment of Hi-Tech Tool Rooms by Central Public Sector Enterprises (CPSEs) as digital service hubs for precision components, a scheme for advanced construction and infrastructure equipment. ₹10,000 crore over five-years is also allocated to develop a competitive container manufacturing ecosystem. These interventions aim to reduce import dependence, shorten supply chains, and lower costs.Beyond advanced manufacturing, the Budget extends support to labour-intensive sectors such as textiles. It also introduces a dedicated thrust to develop India into a global centre for high-quality, affordable sports goods.A Scheme has been proposed to revive 200 legacy industrial clusters to improve their cost competitiveness and efficiency through infrastructure and technology upgradation.Impetus to the manufacturing sector is also provided through taxes. Basic customs duty exemptions have been extended across emerging sectors, including lithium-ion cell battery storage systems, critical mineral processing equipment, raw material for wind turbines and nuclear power plants. In essence, the Union Budget 2026 represents a holistic manufacturing-led growth strategy. It marries structural reforms with targeted fiscal incentives, embraces both advanced and traditional industries, and puts exports and global competitiveness at the centre of its vision. The new set of measures and focus on emerging sectors has the potential to deepen the country’s industrial capabilities and strengthen its position in global value chains. On ground execution and collaboration could mark a transformative chapter in India’s industrial journey.(Neetu Vinayek is Partner, Tax Infrastructure and Oil & Gas Leader, EY India . Manmay Chandawalla, Director-Tax, EY India also contributed to the article.)
The FTSE 100 closed higher on Monday, recouping most of Friday’s hefty falls amid a calmer bond market and as Iran responded to the latest US peace proposal.
The FTSE 100 closed up 128.38 points, 1.3%, at 10,323.75. The FTSE 250 ended up 15.56 points, 0.1%, at 22,611.70, but the AIM All-Share fell 8.72 points, 1.1%, at 800.17.
Iran said it had responded to a new US proposal aimed at ending the war, adding that diplomatic exchanges continue despite Iranian media reports describing Washington’s demands as excessive, AFP reported.
Washington and Tehran have been swapping proposals in an effort to end the conflict, which the US and Israel launched on February 28, but they have held only a single round of talks despite a fragile ceasefire.
“As we announced yesterday, our concerns were conveyed to the American side,” foreign ministry spokesman Esmaeil Baqaei told a news briefing, adding that exchanges were “continuing through the Pakistani mediator”.
Mr Baqaei defended Iran’s demands, including the release of Iranian assets frozen abroad and the lifting of long-standing sanctions.
“The points raised are Iranian demands that have been firmly defended by the Iranian negotiating team in every round of negotiations,” he said.
But with no signs of clear progress, the oil price remained inflated and volatile.
Brent crude for July delivery was trading at 110.80 dollars a barrel on Monday, up compared to 108.83 at the time of the equities close in London on Friday.
After a frantic Friday, the bond markets calmed, while sterling also rebounded as investors weighed the latest political developments.
The yield on UK 10-year gilts traded at 5.14% compared to 5.17% at the same time on Friday.
The pound traded at 1.3397 dollars on Monday afternoon, up from 1.3319 on Friday. Against the euro, sterling firmed to 1.1506 euros from 1.1462 on Friday.
Prime Minister Sir Keir Starmer insisted he would not set out a timetable to leave No 10 as potential leadership challenger Andy Burnham vowed to “change Labour” if he is successful in his effort to return to Parliament.
The Prime Minister said he still wants to lead Labour into the next general election amid calls from within the party to set out a timetable for his exit.
Greater Manchester Mayor Mr Burnham hopes to be Labour’s candidate in the Makerfield by-election, which could provide him with a route back to the Commons to challenge for the party leadership and the keys to Downing Street.
Speaking to broadcasters in London, Sir Keir said he was not going to set out a timetable to stand down if Mr Burnham returns to Westminster.
He added: “I do want to fight the next election. Obviously, I recognise that after the local election results, the elections in Wales and Scotland as well, that the first task is obviously turning things around and making sure that my focus is in the right place.”
Meanwhile, the International Monetary Fund said growth in the UK economy will be stronger this year than previously thought.
The IMF updated its growth projections a month after warning of a sharp slowdown caused by the global energy shock from the US-Iran war.
The influential financial body said it was now predicting UK gross domestic product to rise by 1% in 2026, higher than the 0.8% growth it was forecasting last month.
Responding to the latest report, Chancellor Rachel Reeves said: “The IMF upgrading its growth forecasts and backing our fiscal strategy is yet more proof that this Government has the right economic plan.”
In Europe, equity markets on Monday, the Cac 40 in Paris ended up 0.4%, and the Dax 40 in Frankfurt advanced 1.5%.
In New York, the Dow Jones Industrial Average was down 0.1%, the S&P 500 fell 0.4%, and the Nasdaq Composite was 0.7% lower.
On the FTSE 100, Whitbread closed up 2.3% after Corvex Management urged the Premier Inn owner to put itself up for sale, slamming its recently announced new five-year strategic plan.
In a damning letter to Whitbread management, the New York-based activist hedge fund called the status quo “untenable” and said that the need to pursue “meaningful strategic and structural reform had become unignorable”.
As a result, Corvex, which holds a stake of around 7% in Whitbread, said the only “credible” path to unlocking value at Whitbread is a sale of the company.
Anglo America fell 1.4% as it struck a deal to sell its portfolio of steelmaking coal mines in Australia to Dhilmar for up to 3.88 billion dollars in cash.
The London-based mining house said Dhilmar will pay the FTSE 100-listing 2.3 billion dollars upfront, and the deal has a price-linked earnout of up to 1.58 billion dollars.
Anglo American chief executive officer Duncan Wanblad said: “This agreement represents another major step in the simplification of our portfolio ahead of completing our merger with Teck. Through this transaction, we will complete our exit from steelmaking coal.”
Susannah Streeter, chief investment strategist at Wealth Club, said: “This not only strengthens the balance sheet, ahead of its planned merger with Canada’s Teck Resources, but also keeps it exposed to future strength in coal prices.”
Capita shares rose 8.9% as the London-based outsourcing and business services company said adjusted revenue rose 2.9% on-year in the first four months of 2026, which it said was in line with expectations.
Looking ahead, Capita said it continues to expect a low to mid-single digit revenue climb in Capita Public Service and expects mid-teen revenue growth in its Pension Solutions business.
The biggest risers on the FTSE 100 were Centrica, up 7.70p at 196.95p, National Grid, up 43.50p at 1,231.50p, Pearson, up 37.00p at 1,136.50p, Relx, up 81.00p at 2,504.00p, and SSE, up 74.00p at 2,345.00p.
The biggest fallers on the FTSE 100 were 3i Group, down 128.00p at 2,082.00p, Airtel Africa, down 15.60p at 312.80p, Mondi, down 16.40p at 734.60p, Polar Capital Technology Trust, down 12.50p at 659.00p and Diploma, down 95.00p at 6,625.00p.
Tuesday’s global economic calendar has UK consumer and wholesale inflation figures, eurozone inflation data and the minutes of the last Federal Open Market Committee meeting.
Tuesday’s local corporate calendar has full-year results from business services group DCC, half-year numbers from supplier of specialised technical products and services, Doploma, and electricals retailer Currys.
The Reserve Bank of India (RBI) on Monday decided against activating the countercyclical capital buffer (CCyB), indicating that current financial and credit conditions do not warrant an additional capital requirement for banks, PTI reported.The central bank said the decision followed a review and empirical assessment of indicators used under the CCyB framework.“Based on review and empirical analysis of CCyB indicators, it has been decided that it is not necessary to activate CCyB at this point in time,” RBI said in a statement.Under the RBI (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025, the CCyB framework is activated when financial conditions indicate rising systemic risks linked to excessive credit growth.The framework primarily relies on the credit-to-GDP gap as a key indicator, along with supplementary metrics.According to the RBI, the CCyB mechanism is intended to serve two broad objectives.Firstly, it requires a bank to build up a buffer of capital in good times, which may be used to maintain the flow of credit to the real sector in difficult times.Secondly, it achieves the broader macro-prudential goal of restricting the banking sector from indiscriminate lending in the periods of excess credit growth that have often been associated with the building up of system-wide risk.The framework was introduced globally after the 2008 financial crisis as part of measures proposed by the Group of Central Bank Governors and Heads of Supervision (GHOS) under the Basel framework to strengthen financial system resilience.
The company has announced plans to build seven new models in Europe including a small electric hatchback.
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