Budget 2025: India Goes For Manufacturing Gold

As anticipated by experts, the manufacturing industry received a significant boost from the central government during the Union Budget 2025-26 on Saturday (February 1). 

Whether it’s the proposal to introduce a National Manufacturing Mission, benefitting cleantech manufacturing and MSMEs or an exemption of basic customs duty (BCD) in some critical materials used in lithium-ion (Li-ion) batteries, the Nirmala Sitharaman-led 8th consecutive budget gave some much-needed boost to most sectors in manufacturing. 

“Our Government will set up a National Manufacturing Mission covering small, medium and large industries for furthering ‘Make in India’ by providing policy support, execution roadmaps, governance and monitoring framework for central ministries and states,” said the finance minister during the budget.

She also emphasised that given the government’s commitment to “climate-friendly” development, the proposed mission will support cleantech manufacturing to improve domestic value addition and build the ecosystem for solar PV cells, EV batteries, motors and controllers, electrolysers, wind turbines, high voltage transmission equipment and, grid-scale batteries.

The mission has five key focus areas—enabling the ease and cost of doing business, a future-ready workforce for in-demand jobs, a vibrant and dynamic MSME sector, availability of technology, and quality products.

Key Announcements To Boost Manufacturing 

In fact, supporting MSMEs has also been a major focus area of the government during this year’s budget. The finance minister said that the investment and turnover limits for the classification of all MSMEs, including those in manufacturing, will be enhanced by 2.5X and 2X, respectively.

“Currently, over 1 Cr registered MSMEs, employing 7.5 Cr people, and generating 36% of our manufacturing, have come together to position India as a global manufacturing hub. With their quality products, these MSMEs are responsible for 45% of our exports,” said Sitharaman while making the announcement, adding that the step would these MSMEs achieve higher efficiencies of scale, technological upgradation, and better access to capital.

However, it is pertinent to note that the National Manufacturing Mission and the steps to be undertaken as part of it lacked any proper budgetary allocation and roadmaps for implementation. 

Despite that, industry leaders are largely positive given the preliminary promises under the mission are expected to not only benefit the operation, skill development, and local value addition in the domestic market but also bolster India’s export capabilities.

Uday Narang, founder and chairman of Omega Seiki, told Inc42 that by providing targeted policy support, a robust governance, and a monitoring framework, the Mission will streamline operations and create a conducive environment for industries to thrive. 

“The focus on small, medium, and large industries ensures that every tier of the manufacturing sector is uplifted, enabling them to scale, innovate, and compete globally. This will likely lead to an increase in domestic production, a reduction in dependency on imports, and a significant boost to job creation,” said Narang. 

“Moreover, the emphasis on the ease and cost of doing business will make India a more attractive destination for both local and foreign investments, thus driving further growth in the sector.”

However, it is also important to note that several key recommendations from the semiconductor and the broader electronics system design and manufacturing (ESDM) sector as well as the EV and cleantech industry were not met during the budget.

Cleantech Manufacturing: What The Budget Got Right & Wrong

In line with industry expectations, the sustainability theme was prevalent almost throughout the budget this year.

In continuation of the Centre’s push to Li-ion battery manufacturing for EVs, mobile phones, and other consumer electronics, the Centre announced complete exemption of customs duty on 35 capital goods and machinery for use in the manufacture of these batteries for EVs and 28 capital goods and machinery for use in the manufacture of batteries for mobile phones.

BCD has also been removed from critical materials such as cobalt, lithium-ion battery scrap, and lead.

We must note that during the previous budget in July last year, the Indian government had announced customs duty exemption on 25 critical minerals, including cobalt, lithium, copper, germanium, and silicon. 

As she noted then, these critical minerals and rare earth elements are truly critical for sectors including nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics — all of which have separately received some important policy boost from the Centre in budget this year.

Taking some bold steps towards further enabling nuclear energy, the finance minister proposed the establishment of a Nuclear Energy Mission with an outlay of INR 20,000 Cr. While the aspect of sustainability and clean energy is highly debatable here, the step could be significant in helping India become less reliant on fossil fuels.

On the other hand, though the energy industry’s demand for an enhancement of fund allocation for green hydrogen is long-pending, the matter wasn’t addressed during this year’s budget.

Sandiip Bhammer, founder and managing partner at Green Frontier Capital said that the announcement of a dedicated Manufacturing Mission with an emphasis on cleantech manufacturing is a definitive step in the right direction for India’s industrial transformation. 

“This initiative will accelerate the adoption of sustainable production methods, foster technological innovation and attract investments in green manufacturing solutions. As global demand shifts toward eco-friendly products and processes, this mission can position India as a key player in the global supply chain,” he said.

However, Bhammer also noted that while the budget has outlined India’s intent to promote cleantech manufacturing, the lack of a detailed roadmap or specific budgetary allocation is missing. 

“For transformative impact, clarity around incentives, infrastructure development and funding mechanisms is crucial and necessary. Focused policy frameworks and measurable goals could provide greater confidence to investors and industry players together,” he added.

ESDM Sector: What It Received & Missed

The ESDM sector and semiconductor industry had hoards of recommendations to the government, most of which were not fulfilled. This included an introduction of India Semiconductor Mission 2.0, enhancement of the PLI budget for manufacturing, and a few others.

However, despite that, the industry is not completely disappointed.

The sector is looking to benefit from the announcement of INR 10,000 Cr funds of funds and the proposal for a deeptech fund, which will ultimately help startups, and deeptech will not be missed out given the startups here are emerging stronger than ever.

Besides, the government’s MSME focus will also help the small and medium businesses in the ESDM sector.

Ashok Chandak, president of the India Electronics & Semiconductor Association (IESA) told Inc42 that the Union Budget 2025-26 presents several indirect benefits for the ESDM sector, which also aligns with key recommendations from the IESA, but they got muted amid the big announcements.

IESA’s focus was on startups, R&D, skilling, export support, and continued semiconductor manufacturing incentives, which has been partially addressed through schemes including the budget’s provisions for MSME support, startup’s Centers of Excellence (CoEs) in skilling and AI, reduced BCD on display panels and lithium-ion batteries, export promotion schemes, tax certainty for electronics manufacturing, establishing national manufacturing mission, and presumptive taxation on electronics manufacturing support, among others.

“The INR 20,000 Cr allocated for R&D, along with 10,000 technology fellowships at IITs, will foster innovations and IPR development,” Chandak said.

However, he also noted that the budget lacks clarity on ISM 2.0 (incentives beyond the $10 Bn mark) and does not introduce a major PLI scheme for components or a dedicated product creation initiative as a growth driver. “This could potentially slow the pace of value addition in India’s electronics ecosystem. We remain optimistic that these aspects will be addressed through specific policy measures beyond the budget announcement,” he added.

Export, The “4th Engine” Of Growth

As noted by Chandak, the proposals for the manufacturing industry during the Budget 2025 are expected to push India’s export market further. 

Omega Seiki’s Narag said that the National Manufacturing Mission will strengthen India’s export potential by enhancing production quality, reducing manufacturing costs, and improving global competitiveness. 

“By focusing on ease of doing business and technological advancement, India will be able to deliver high-quality products at competitive prices… the focus on a skilled workforce ensures that industries can meet global demand for advanced, sustainable products,” he said.

Speaking on a similar note, Leo Peter Charles, founder and MD of Jane Solutions, also said that with this NMM, India will have the leverage of becoming an aggressively export-oriented country if all the cards are played well.

Meanwhile, it is pertinent to note that today, Sitharaman also proposed establishing an Export Promotion Mission calling exports the “fourth engine”.

As per Economic Survey 2024-25, total exports, including merchandise and services, have seen a steady 6% growth in the first nine months of FY25 reaching $602.6 Bn. Growth in services and goods exports, excluding petroleum and gems and jewellery, was 10.4%. However, there was a slight moderation in export growth in some areas when compared to the growth witnessed in the same period of FY24.

[Edited by Nikhil Subramaniam]