India stands at a pivotal economic development point where it has the potential to become the globe's biggest manufacturing epicentre. A report by Statista projects that India’s manufacturing market will grow by 3.46 per cent (2025-2029), reaching a market volume of $275.4 billion by 2029. To capitalise on this potential, policymakers must secure existing developments to establish an innovative industrial era which promotes both resilience and competitiveness. This will unlock enormous employment opportunities and catalyse transformative growth across various sectors.
As Budget 2025-26 approaches the government is expected to implement new policies and strengthen existing programmes to support manufacturing industries in India.
Expanding the PLI scheme: A pathway to growth in emerging sectors
The Production-Linked Incentive (PLI) scheme is one of the pillars behind India's transformation in manufacturing. Originally initiated to augment manufacturing in most sectors, this scheme has worked successfully so far. However, PLI needs to be pushed further into retail manufacturing, an area with huge opportunities and a very strong capacity for growth. The expansion of PLI by the government will lead to growth in industries like textiles and footwear, as well as more sustainable goods, where export demand is massive.
Furthermore, the manufacturing sector needs more investment, a boost to the PLI scheme, and tax reforms in the Union Budget 2025. The Budget 2025-26 should introduce a PLI scheme for R&D to attract foreign companies and make India a global manufacturing innovation hub.
Simplifying processes for MSMEs
Micro, Small, and Medium Enterprises (MSMEs) form the backbone of India's manufacturing sector. However, these industries face significant challenges in accessing funds, dealing with regulations, and scaling up. The upcoming budget should simplify processes for MSMEs, addressing these challenges directly. Budget 2025 should prioritise raising awareness among MSMEs through campaigns that simplify application processes, educate businesses about credit bureau scores, and offer comprehensive support to help them navigate the complexities of digital platforms.
Streamlining registration, funding, and growth processes will encourage entrepreneurship and strengthen India’s manufacturing value chain. With proper support, MSMEs can offer innovative solutions, reduce costs, and add flexibility to the sector. This is essential for India in the global market.
By making compliance easier, providing tax benefits, and improving access to finance, MSMEs will be able to innovate and grow. As these companies expand, they can contribute to the nation’s exports and create millions of jobs.
Positioning India as a global manufacturing hub: Export-focused policies
India’s vision to become a global manufacturing hub depends heavily on strengthening export capabilities. In the upcoming budget, export-focused policies must be at the heart of the government’s strategy to help India compete in international markets. Additionally, India should support industries with strong export potential including retail, textiles, healthcare and chemicals. The "Make in India" initiative has gained attention, but now it’s time to boost India’s global presence. Attracting foreign investment, offering competitive tax rates, and simplifying export regulations will strengthen India’s position in global manufacturing.
Budget 2025-26 should help industries by simplifying the export process, incentives for exporting industries, and profitable trade negotiations. This shall allow major markets to attract investment, create jobs, and position India as a preferred manufacturing base for sourcing products in Asia.
Tariff reforms: Aligning innovation with resilience
Aligning tariff reforms with innovation and resilience within the industrial ecosystem should be one of the main focuses of Budget 2025-26. In the last few years, India has taken major strides forward in implementing tariff reforms to reduce barriers in trade and induce innovation. Yet, as the global economy rapidly shifts, it becomes increasingly important to ensure that tariffs in India not only are competitive but also innovate with emerging industries.
The rapidly evolving global economy demands a tariff structure that remains competitive while promoting emerging industries like renewable energy and AI-powered manufacturing technologies. In this light, such tailored incentives would trigger domestic innovations and sustainable practices while hardening global shocks against the country.
Reducing unemployment: Incentives for local manufacturing and skill development
India’s most urgent challenges include unemployment, especially among the youth of the country. Promoting local manufacturing can help in addressing this. Through fiscal incentives targeting manufacturing companies setting up operations in India, the government will successfully create many new job positions. With the unemployment rate at 8.3 per cent as of November 2024, the upcoming budget must prioritise job creation, particularly through skill development programs. This will lead to supporting a skilled and adaptable workforce and innovative development in the industry.
Conclusion: A brighter future for India
The Budget 2025-26 has the potential to establish India as a global manufacturing powerhouse. With the expansion of the PLI scheme for emerging sectors, streamlining processes for MSMEs, aligning export-focused policies, tariff reforms, and incentives for local manufacturing along with skill development, the budget will ensure a resilient and competitive industrial ecosystem.
The author is the co-founder and CEO of Showroom B2B
