India is taking significant steps to boost its manufacturing and semiconductor sectors while enhancing infrastructure investments, as Prime Minister Narendra Modi’s administration aims to maintain economic growth amid escalating trade tensions with the United States. During a recent parliamentary address, Finance Minister Nirmala Sitharaman noted the challenges posed by a precarious global trade environment, highlighting the need for resilience in supply chains.
Despite being the largest trading partner, India has yet to secure a trade agreement with the US, which has imposed tariffs on Indian imports, including Russian oil. Sitharaman introduced plans in the budget for the 2026-27 fiscal year that focus on increasing capital expenditure by nearly 9%, with particular emphasis on manufacturing in “strategic and frontier sectors.” Additionally, India is targeting an increase in manufacturing’s contribution to the economy from 16% to 25%, aiming to position itself as a competitor to China in global supply chains.
The budget also aims to address challenges faced by industries impacted by US tariffs, including substantial investments in textile parks and the biopharmaceutical sector. A notable allocation of Rs400 billion for semiconductor manufacturing underscores the government’s strategic focus.
Moreover, Sitharaman outlined a vision to reduce the debt-to-GDP ratio and maintain a fiscal deficit of 4.4%. With a projected GDP growth rate of 7.4% for the current fiscal year, analysts remain cautious about the sustainability of economic expansion, especially with capital expenditure reaching a record Rs12.2 trillion.
Why this story matters:
- It reflects India’s strategy to enhance economic resilience amid global trade challenges.
Key takeaway:
- The budget outlines significant investments in key sectors to boost economic growth and competitiveness.
Opposing viewpoint:
- Concerns persist regarding the feasibility of ambitious capital expenditure plans exceeding total borrowing limits.
