Union Budget 2026: A Push to Strengthen Textiles, MSMEs and Industrial Growth in India

India’s Finance Minister presented the Union Budget 2026–27 on 1 February 2026, outlining the government’s economic priorities for the coming financial year. Set against the backdrop of steady growth, moderating inflation and evolving global uncertainties, the Budget lays out a forward-looking roadmap focused on strengthening domestic manufacturing, supporting MSMEs, accelerating infrastructure development and deepening financial sector reforms. Anchored in the vision of Viksit Bharat, the Union Budget 2026 seeks to balance growth ambitions with fiscal discipline, inclusion and long-term economic resilience.

Key Features of the Union Budget 2026–27

The Union Budget 2026–27 lays out a clear and action-oriented roadmap for India’s next phase of growth, anchored in the vision of Viksit Bharat. The focus is on transforming aspiration into achievement through sustained reforms, fiscal discipline and people-centric development

• Growth with Stability and Fiscal Prudence

The Budget strikes a balance between high growth and macroeconomic stability. With inflation remaining moderate and growth projected at around 7 percent, the government has reaffirmed its commitment to fiscal consolidation. The fiscal deficit for 2026–27 is estimated at 4.3 percent of GDP, aligned with the long-term goal of bringing the debt-to-GDP ratio to 50±1 percent by 2030.

• Sustaining Momentum of Structural Reforms

A strong reform narrative underpins the Budget, with over 350 reforms already implemented across taxation, labour, quality standards and compliance rationalisation. These reforms aim to enhance productivity, improve competitiveness and build resilience against global volatility. Trust-based governance and reduced regulatory friction remain central themes.

• Manufacturing and Industrial Expansion

The Budget places manufacturing at the core of economic strategy, with targeted support for strategic and frontier sectors such as electronics, semiconductors, biopharma, textiles, chemicals and rare earth processing. A scheme to revive 200 legacy industrial clusters through infrastructure and technology upgrades is expected to improve cost efficiency and global competitiveness. Special initiatives for sports goods manufacturing and high-value construction equipment further strengthen domestic industrial capacity

• MSME Development as Growth Champions

MSMEs are supported through a three-pronged approach covering equity, liquidity and professional assistance. A ₹10,000 crore SME Growth Fund will nurture high-potential enterprises, while an additional ₹2,000 crore infusion into the Self-Reliant India Fund will support micro enterprises. Liquidity is enhanced through mandatory use of the TReDS platform by CPSEs, credit guarantee support for invoice discounting and development of a secondary market for receivables. Professional support will be enabled through Corporate Mitras to help MSMEs manage compliance efficiently

• Infrastructure, Urbanisation and Connectivity

Public capital expenditure continues to be a key growth driver, supported by innovative financing mechanisms such as InVITs, REITs and NIIF. The development of City Economic Regions and seven high-speed rail corridors will act as growth connectors, particularly benefiting Tier II and Tier III cities. New freight corridors, national waterways and coastal shipping initiatives aim to reduce logistics costs and strengthen supply chains

• Financial Sector Strengthening

The Budget acknowledges the resilience of India’s banking system and outlines reforms to deepen capital markets and enhance risk management. Measures include restructuring of PFC and REC, introduction of market-making frameworks in corporate bonds and a comprehensive review of FEMA rules. Tax proposals for the financial sector include changes to securities transaction tax to improve market depth and transparency

• People-Centric and Inclusive Development

People-centric development remains a defining feature of the Budget. Initiatives include strengthening the care ecosystem, training 1.5 lakh multiskilled caregivers, expanding mental health infrastructure and promoting dignified livelihoods for Divyangjan. Women-led enterprises will be supported through Self-Help Entrepreneur Marts, enabling a shift from credit-led livelihoods to sustainable enterprise ownership

• Ease of Doing Business and Ease of Living

The Budget advances ease of doing business through extensive tax and compliance reforms. These include simplified TDS and TCS provisions, automated processes for lower deduction certificates, extended timelines for revised returns and decriminalisation of select procedural defaults. A single digital window for cargo clearance and reforms in customs warehousing further reduce compliance burdens

What does Union Budget 2026 include?

India’s latest economic roadmap places strong emphasis on manufacturing-led growth, employment generation and global competitiveness. With targeted interventions across textiles, MSMEs, industrial clusters, infrastructure and financial reforms, the policy direction signals a coordinated effort to strengthen domestic capabilities while attracting global capital and talent.

• MSME Growth and Creation of Champion Enterprises

MSMEs remain central to India’s growth story, and a three-pronged strategy has been outlined to address equity, liquidity and professional support.

Liquidity support will be strengthened through reforms to the Trade Receivables Discounting System platform. Mandatory onboarding of CPSEs for MSME procurement payments, credit guarantee support for invoice discounting and integration of GeM with TReDS are expected to ease cash flow constraints. The introduction of TReDS receivables as asset-backed securities will further deepen secondary markets.

On the professional side, the development of Corporate Mitras through short-term courses by professional institutions will help MSMEs manage compliance requirements at affordable costs, particularly in Tier-II and Tier-III cities.

• City Economic Regions and Connectivity

Seven high-speed rail corridors have been proposed as growth connectors linking major economic regions. These include Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Hyderabad–Chennai, Chennai–Bengaluru, Delhi–Varanasi and Varanasi–Siliguri. Improved connectivity is expected to enhance regional integration, reduce logistics costs and support urban and industrial expansion.

• Financial Sector Reforms

The banking sector has been acknowledged for its strong balance sheets, improved profitability and expanded financial inclusion. A roadmap for NBFCs under the Viksit Bharat vision has been outlined, with emphasis on credit growth and technology adoption. Proposals to restructure PFC and REC aim to improve scale, efficiency and lending capacity within public sector NBFCs.

• Women-led Rural Enterprises

To promote women entrepreneurship, Self-Help Entrepreneur Marts will be introduced. These community-owned retail outlets will support women in transitioning from credit-led livelihoods to enterprise ownership. Innovative financing and cluster-level federation support will play a key role in scaling these initiatives.

• Textile and Apparel Sector Push

The textile and apparel sector has received a comprehensive boost through the launch of an Integrated Programme for Textiles built around five strategic pillars. The National Fibre Scheme aims to strengthen self-reliance across natural, man-made and new-age fibres, reducing import dependence and encouraging domestic innovation.

The Textile Expansion and Employment Scheme focuses on modernising traditional textile clusters through capital support, technology upgrades and access to shared testing and certification facilities. This is expected to improve productivity while supporting employment generation at scale.

A National Handloom and Handicraft Programme will consolidate existing schemes and provide targeted assistance to artisans and weavers. Complementing this, the Tex-Eco Initiative seeks to position Indian textiles as globally competitive and environmentally sustainable.

Samarth 2.0 will enhance skilling in the textile sector through industry-academia collaboration, ensuring workforce readiness for modern manufacturing requirements. In addition, Mega Textile Parks will be established through a challenge-based approach with a strong focus on value addition in technical textiles.

The Mahatma Gandhi Gram Swaraj Initiative will further strengthen khadi, handloom and handicrafts by enabling global market linkages, branding support, skill development and quality enhancement. A dedicated initiative will also work towards positioning India as a global hub for sports goods manufacturing, with focus on research and development, design and material sciences.

• Rejuvenation of Industrial Ecosystems

To improve competitiveness and cost efficiency, a new scheme has been announced to revive 200 legacy industrial clusters. This will involve infrastructure modernisation and technology upgrades, helping clusters adapt to changing market demands and global standards.

• Attracting Global Investment and Talent

A range of tax incentives has been announced to attract global investment and expertise. These include a tax holiday till 2047 for foreign cloud service providers using Indian data centres, safe harbour provisions for data centre services and just-in-time component warehousing for electronics manufacturing.

Non-resident suppliers of capital goods to toll manufacturers in bonded zones will receive a five-year income tax exemption, as will non-resident experts working in India under notified schemes. MAT exemption for non-residents under presumptive taxation further enhances India’s attractiveness as a global business destination.

Final Thoughts

Taken together, these measures reflect a clear intent to build resilient industrial ecosystems, empower MSMEs, strengthen traditional sectors like textiles and integrate India more deeply into global value chains. The success of these initiatives will depend on effective implementation, collaboration between stakeholders and sustained focus on competitiveness and innovation.

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