Union Budget 2025-26 recognizes exports as one of the four key growth engines and announced few measures to boost Bharat’s foreign trade.

The government has introduced an Export Promotion Mission, with an allocation of INR2,250 crore. This initiative aims to facilitate seamless access to export credit, enhance cross-border factoring support and tackle non-tariff trade barriers in global markets, to be coordinated jointly by the Ministries of Commerce, MSME, and Finance.

To simplify trade processes and improve efficiency, the budget announced the launch of BharatTradeNet—a unified digital platform for trade documentation and financing solution. This platform will complement the existing Unified Logistics Interface Platform, aligning India’s trade infrastructure with global best practices adopted by trading hubs like Singapore and the EU. By enabling real-time tracking and reducing paperwork, the platform is expected to cut transaction costs, improve ease of doing business and enhance trade transparency.

The budget, in order to upgrade India’s logistics infrastructure, wants to leverage on the digitised geospatial records, improvement in air cargo facilities, all aimed at cutting trade costs and making Indian exports more competitive. 

The budget introduced targeted reforms for crucial sectors like- increasing the credit guarantee cover for micro and small enterprises from ₹5 crore to ₹10 crore, enabling additional credit of ₹1.5 lakh crore over five years.

Exporter MSMEs will benefit from term loans up to ₹20 crore with enhanced guarantee cover.

Focus on Labour-Intensive Sectors

• A Focus Product Scheme for the footwear and leather sector will support design, component manufacturing, and non-leather footwear production, expected to create 22 lakh jobs and generate a turnover of ₹4 lakh crore.
• A new scheme for the toy sector will promote cluster development and skill-building, aiming to position India as a global toy manufacturing hub.

Manufacturing and Clean Tech Initiatives

• A National Manufacturing Mission will provide policy support and roadmaps for small, medium, and large industries under the Make in India initiative.
• Special emphasis will be given to clean tech manufacturing, fostering domestic production of solar PV cells, EV batteries, wind turbines, and high-voltage transmission equipment.

Budgetary allocation of INR20,000 crore has been announced to strengthen R&D and innovation in partnership with the private sector.

With a strong emphasis on trade infrastructure, digital integration and industry-focused policy measures, Budget 2025 aims to lay a strong foundation for India’s export ambitions.

Strengthening logistics and connectivity

The shipbuilding sector receives a boost, with dedicated clusters, skilling programmes and new technology adoption. Besides, the National Geospatial Mission, under PM Gati Shakti, will provide private sector access to critical data and maps, strengthening overall infrastructure development. The PM Gatishakti National Master Plan (NMP) is an ambitious initiative launched by the Government of India in October 2021, to improve multi-modal connectivity across the country, focusing on improving infrastructure and enhancing the ease of doing business. The plan aims to create a digital platform that integrates various modes of transport, such as roads, railways, ports, and airports, with the goal of reducing logistics costs, boosting economic growth, and improving efficiency across key sectors.

Other initiatives announced in the Budget 2025-26 are:

• Each infrastructure-related ministry to come up with a three-year pipeline of projects that can be implemented in PPP mode. States will also be encouraged to do so and can seek support from the India Infrastructure Project Development Fund (IIPDF) scheme to prepare PPP proposals.    
• An outlay of INR 1.5 lakh crore is proposed for the 50-year interest free loans to states for capital expenditure and incentives for reforms.   
• Building on the success of the first Asset Monetization Plan (AMP) announced in 2021, the second Plan for 2025-30 will be launched to plough back capital of INR 10 lakh crore in new projects. The government says that regulatory and fiscal measures will be fine-tuned to support the Plan. AMP, 2021 was aimed to garner Rs. 6 lakh Crs by 2025 and could mobilise Rs. 3.86 lakh Crs by 2024.
• Target to development at least 100 GW of nuclear energy by 2047 for India’s energy transition efforts. The government announced that for an active partnership with the private sector towards this goal, amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act will be taken up. As a sequel to the Union Budget 2025-26, NPCIL has announced that it aims to meet 50% of the country’s nuclear energy requirements by 2047.

• For long-term financing for the maritime industry, a Maritime Development Fund with a corpus of INR 25,000 crore will be set up. This will be for distributed support and promoting competition. This will have up to 49% contribution by the Government, and the balance will be mobilised from ports and the private sector. 

• A national framework will be formulated as guidance to states for promoting Global Capability Centres in emerging tier 2 cities. This will suggest measures for enhancing availability of talent and infrastructure, building-byelaw reforms, and mechanisms for collaboration with industry. 
• The government will facilitate upgradation of infrastructure and warehousing for air cargo including high value perishable horticulture produce. Cargo screening and customs protocols will be streamlined and made user-friendly.     

Support to Domestic Manufacturing and Value addition measures:

• Full exemption on Basic Customs Duty (BCD) to cobalt powder and waste, the scrap of lithium-ion battery, Lead, Zinc and 12 more critical minerals. This is expected to smoothly secure their availability for manufacturing in India and promote more jobs for our youth. 
• To promote domestic production of technical textile products such as agro-textiles, medical textiles and geo textiles at competitive prices, two more types of shuttle-less looms will be added to the list of fully exempted textile machinery.  BCD will be revised for knitted fabrics covered by nine tariff lines from “10% or 20%” to “20% or INR 115 per kg, whichever is higher”.
• To rectify inverted duty structure, BCD on Interactive Flat Panel Display (IFPD) will be increased from 10% to 20% and reduced to 5% on Open Cell and other components. 
• BCD on parts of Open Cells will now stand exempted.
•  The list of exempted capital goods will have an addition of 35 capital goods for EV battery manufacturing, and 28 additional capital goods for mobile phone battery manufacturing. This step is expected to boost domestic manufacture of lithium-ion battery, both for mobile phones and electric vehicles.
• It is proposed to continue the exemption of BCD on raw materials, components, consumables or parts for the manufacture of ships (including ship breaking) for another ten years, since ship building and ship breaking are a long gestation activity.
• To prevent classification disputes, BCD will be reduced from 20% to 10% on Carrier Grade ethernet switches to make it at par with Non-Carrier Grade ethernet switches.

Export Promotion

• To facilitate exports of handicrafts, time period for export to be extended from six months to one year, further extendable by another three months, if required. Additionally, nine items will be to the list of duty-free inputs.
• BCD exemption on Wet Blue leather to facilitate imports for domestic value addition and employment. 
• Export duty exemption to crust leather from the current 20% to facilitate exports by small tanners. 
• To enhance India’s competitiveness in the global seafood market, BCD reduction from 30% to 5% on Frozen Fish Paste (Surimi) for manufacture and export of its analogue products. BCD is reduced from 15% to 5% on fish hydrolysate for manufacture of fish and   shrimp feeds.

In July 2024 Budget, to promote development of domestic MROs for aircraft and ships, the government had extended the time limit for export of foreign origin goods that were imported for repairs, from 6 months to one year and further extendable by one year. Similar rules will be applicable for railway goods now.

No doubt, the above measures announced in Union Budget 2025-26 will be a shot in the arm for domestic manufacturing and exports. However, international experience says that a country’s manufacturing sector will need at least two decades duration to develop significantly and turn into net exporter. Considering the various ground level hurdles faced by Bharatiya Entrepreneurs, government needs to put in sustained efforts for close to two decades for the expected results to fructify.

The following types of Indian product shipments represent positive net exports or a trade balance surplus (2023).

1. Pharmaceuticals: US$18.7 billion (Up by 9.8% since 2022)
2. Vehicles: $13.1 billion (Down by -8.2%)
3. Cereals: $11.1 billion (Down by -20.2%)
4. Clothing, accessories (not knit or crochet): $7 billion (Down by -8%)
5. Fish: $6.1 billion (Down by -6.7%)
6. Knit or crochet clothing, accessories: $6 billion (Down by -19%)
7. Cotton: $5.7 billion (Up by 9.4%)
8. Miscellaneous textiles, worn clothing: $4.7 billion (Down by -12.1%)
9. Articles of iron or steel: $4.7 billion (Down by -6.3%)
10. Meat: $3.6 billion (Up by 12.1%)

The following types of Indian product shipments represent negative net exports or a trade balance deficit (2023).

1. Mineral fuels including oil: -US$130.9 billion (Down by -26.8% since 2022)
2. Electrical machinery, equipment: -$43.7 billion (Up by 1.3%)
3. Gems, precious metals: -$39.2 billion (Up by 0.7%)
4. Machinery including computers: -$27.7 billion (Up by 1.6%)
5. Plastics, plastic articles: -$15.5 billion (Up by 6.9%)
6. Animal/vegetable fats, oils, waxes: -$14.6 billion (Down by -26%)
7. Fertilizers: -$10.3 billion (Down by -39.9%)
8. Organic chemicals: -$7.8 billion (Down by -1.1%)
9. Optical, technical, medical apparatus: -$7.6 billion (Up by 12.1%)
10. Iron, steel: -$7.1 billion (Up by 358.9%)

Long term policy and strategic action plan

Bharat needs to have a long-term policy to convert the above negative net exports to positive net exports. States like Uttar Pradesh, Bihar and Madhya Pradesh have combined population of around 50 crores, have abundant natural resources but are under developed and have high levels of poverty and unemployment. The union government should guide and support these three states to draft a long-term manufacturing policy with specific focus to boost manufacturing sector. Based on the strengths and advantages of these three states a strategic plan to be designed by the respective state governments to promote large industries, MSMEs, agro based and cottage industries. This will enable these states to improve their GSDP (Gross State Domestic Product), reduce poverty and unemployment and more importantly reduce the number of people migrating to other states in search of employment. Such a strategic approach will reduce the gaps between the developed and under developed states in addition to enhancing the country’s GDP significantly and substantially reducing the poverty and unemployment in couple of decades time. This will also give a fillip to country’s manufacturing sector whose share of value addition in GDP is 15.9% in 2023-24, which was 16.7% in 2013-14.  The Union government should review the status of Make in India in this decade, identify the factors that adversely impacted the take off of Make in India and take corrective measures in Make in India 2.0. Our trade deficit with China which was $. 37.8 bn in 2014 rose to $. 85.1 bn in 2024 !

Cost competitiveness, quality and innovation are the three pillars to create a strong global market and our country needs to focus on these three pillars in order to become a leading global player. Bharat can learn lessons from both bigger countries (like China) and smaller countries (like South Korea) in this regard.

While annual budgets have a limited role and provide funding support for incremental growth, this should be preceded by appropriate long-term policies and strategic action plans. It is high time we lay emphasis on long term policies and strategic action plans and put in the right efforts in the execution of the same. 

Reference:

1. Budget 2025.

2. Economic Survey on India’s Global Trade.