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The recent Union Budget in India has unveiled a series of policy measures designed to invigorate domestic production and economic growth. A sectoral impact analysis conducted by CareEdge reveals a diverse range of effects across various industries. Some sectors, particularly those focused on manufacturing and infrastructure development, are poised to experience significant benefits, while others are expected to see a more neutral impact. The analysis highlights the government's strategic focus on promoting self-reliance and strengthening key industrial pillars.
Among the sectors projected to gain the most are auto and auto components, fertilizers, textiles, and transport infrastructure. The automotive industry is set to benefit from substantial tax breaks and incentives aimed at promoting green mobility. Full exemption of customs duty on crucial materials like cobalt powder and lithium-ion battery components is intended to lower manufacturing costs and enhance competitiveness in the electric vehicle (EV) market. The Production Linked Incentive (PLI) scheme, designed to incentivize domestic manufacturing, will further support this growth trajectory. The PM e-Bus Sewa and PM e-DRIVE schemes are also expected to significantly boost EV adoption. The reduction in tax rates under the new regime is anticipated to increase disposable income, thus fueling demand for vehicles.
The fertilizer sector is also anticipated to experience a positive impact. The recent addition of substantial urea production capacity has already reduced India's import dependence, and the announcement of a new urea plant further strengthens this trend. While the overall subsidy budget for FY26 shows a slight decrease compared to the revised estimates for FY25, it is considered sufficient if input prices remain stable. The textile industry stands to gain from increased allocations towards the ‘Mission for Cotton Productivity’, aiming to improve cotton farming and ensure a steady supply of quality raw material. Exemptions on Basic Custom Duty (BCD) for shuttle-less looms and increased support for export-oriented schemes through RoDTEP and RoSCTL will stimulate further growth and investment in the sector.
The power and renewable energy sector is projected to benefit significantly from proposed amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act, facilitating private sector participation in the nuclear power sector. A dedicated R&D initiative for Small Modular Reactors (SMRs) with a substantial financial outlay is expected to boost nuclear power capacity. The national manufacturing and critical mineral mission will aid in domestic solar power plant, wind turbine, and battery manufacturing, lessening reliance on foreign supply chains. Continued support for state discom reforms through additional borrowing limits further bolsters the sector’s outlook.
However, not all sectors are expected to experience a similar boost. The healthcare and pharmaceutical sectors are considered to have a neutral impact, despite a 12% increase in budget allocation for health. While this will improve rural and semi-urban healthcare infrastructure and aid in the quicker disbursement of funds under PMJAY, the overall impact on the industry's growth trajectory remains relatively unchanged. Similarly, the BFSI sector is also projected to have a neutral impact. Though measures like enhanced investment limits for MSMEs and increased credit guarantee coverage will provide more financial support, the overall effect on the sector's growth is not anticipated to be transformative.
The non-ferrous metals sector is also classified as having a neutral impact, primarily due to the full exemption of Basic Customs Duty on waste and scrap of non-ferrous metals. This move is likely to benefit secondary recycling players by lowering input costs and reducing the impact of foreign exchange fluctuations, enhancing their competitiveness. The real estate sector, however, is expected to see a positive impact, thanks to initiatives like SWAMIH Fund 2.0 aimed at providing liquidity to stalled housing projects. Revised tax slabs and increased rebates are projected to boost demand, while tax simplifications may encourage further investment. The government's plan to introduce a National Framework for Global Capability Centres (GCCs) is also expected to stimulate development in tier 2 cities.
Transport infrastructure, encompassing roads, air, and shipping, also receives a positive outlook. Continued capital expenditure for roads and railways, coupled with increased allocations for airports and shipping, will drive further development. A shift towards Public-Private Partnerships (PPPs) in the road sector is expected to accelerate project awards. The revamped Shipbuilding Financial Assistance (SFA) scheme aims to attract private sector investments in shipbuilding, while initiatives like the HML inclusion and the establishment of a maritime fund will enhance long-term funding for the shipping sector. Improved airport infrastructure through Udaan 2.0 is expected to boost regional air connectivity. Overall, the Union Budget reveals a targeted approach to economic stimulation, prioritizing sectors deemed crucial for India’s growth and development.
Source: Sectoral Impact Analysis: Which sectors stand to gain the most?