India Boosts Manufacturing in New Budget to Sustain Growth
On February 1, 2026, India’s Finance Minister Nirmala Sitharaman presented the annual federal budget, emphasizing a renewed focus on boosting manufacturing within the country. This initiative aims to accelerate economic growth amidst a challenging global landscape.
Manufacturing Sector Boosted in India’s Budget
The budget outlines a strategic approach to elevate the manufacturing sector’s contribution from under 20% of GDP to 25%. This effort is intended to create jobs for millions of individuals entering the workforce annually.
Key Financial Metrics
- Projected GDP growth: 7.4% for the current financial year.
- Inflation rate: approx. 2%.
- Fiscal deficit: targeted at 4.4% of GDP.
- Debt-to-GDP ratio goal: 55.6%, down from 56.1%.
- New borrowing: 17.2 trillion rupees from bond markets.
To stimulate private investment and consumer demand, recent reforms include tax cuts, labor law reforms, and the liberalization of the nuclear-power sector. Furthermore, Sitharaman announced that seven key sectors would receive priority in manufacturing development:
- Pharmaceuticals
- Semiconductors
- Rare-earth magnets
- Chemicals
- Capital goods
- Textiles
- Sports goods
The government plans to review 200 legacy industrial clusters to enhance operational efficiency as part of this manufacturing boost.
Long-term Economic Goals
Prime Minister Narendra Modi discussed the importance of transitioning to long-term solutions for sustainable growth. He highlighted the need for next-generation reforms as the country aims to become a developed economy by 2047.
In addition to manufacturing initiatives, the budget allocates 12.2 trillion rupees ($133.08 billion) toward infrastructure development, an increase from the previous year’s 11.2 trillion rupees.
Financial Sector Review and Regulations
The government will establish a high-level committee to evaluate regulations governing the financial sector. This review aims to facilitate foreign investment in Indian markets and support the evolving economic landscape.
- Introduction of total return swaps (TRS) to enhance corporate bond market functionality.
- Increased transaction tax on equity derivatives to temper market activity.
The budget reflects a comprehensive plan to strengthen India’s financial framework while addressing the country’s pressing need for job creation through manufacturing growth. The government’s focus on innovation and reform indicates its commitment to navigating current economic challenges and fostering sustainable development.
