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India Prepares for Budget 2026: Industry Calls for Transformative Reforms
As India navigates a complex global economic landscape marked by sluggish growth in developed nations and ongoing trade disruptions, its own economy shows remarkable resilience. The World Bank projects India's growth at 6-6.5%, crediting progressive government policies like the Production Linked Incentive (PLI) scheme and Goods and Services Tax (GST). As the nation gears up for the fiscal year 2026-27, leading advisory firm Deloitte and industry body ASSOCHAM (Associated Chambers of Commerce and Industry of India) have laid out ambitious pre-budget expectations.
Shifting Growth Trajectory: From Infrastructure to Innovation
While acknowledging the success of government capital expenditure in infrastructure, both Deloitte and ASSOCHAM emphasize that the next phase of India's growth must pivot towards advanced capabilities. Their reports highlight the need for 'next-gen' focus areas including high-tech manufacturing, ensuring digital sovereignty, and resolving persistent tax friction. The core message is a call for strategic, long-term incentives over short-term populist measures.
The Crucial 15% Tax Regime for Manufacturing
A significant demand from both organizations is the revival and extension of the 15% concessional corporate tax rate for new manufacturing units. This provision, initially introduced under Section 115BAB in 2019, expired in March 2024. Deloitte further suggests extending this benefit to Global Capability Centres (GCCs) to position India not just as a service hub but as a genuine innovation center. This aims to attract more sophisticated operations and technological development within the country.
Securing Raw Materials and Boosting Strategic Sectors
To enhance the competitiveness of domestic industries, particularly steel and alloys, ASSOCHAM has requested a zero customs duty on critical raw materials such as coking coal, ferro nickel, and stainless steel scrap. This measure is seen as vital to counter alleged dumping from countries like China and Vietnam. Furthermore, both bodies advocate for PLI-style support for emerging sectors. While ASSOCHAM points to textiles and food processing, Deloitte champions incentives for space technology, suggesting GST exemptions for launch vehicles, and for nuclear energy startups.
Forging a Digital Future and Data Sovereignty
Deloitte has proposed a comprehensive National Digital Infrastructure Mission 2030, envisioning a long-term, mission-mode program to integrate digital investments across identity, payments, data exchange, health, skilling, and commerce. This initiative would adopt a co-funding model with states and follow the integrated approach of the Gati Shakti master plan. Simultaneously, both reports stress the importance of data centers, demanding infrastructure status and tax holidays. With the Digital Personal Data Protection (DPDP) Act emphasizing data sovereignty, tax incentives are deemed crucial for encouraging data localization.
Streamlining Trade and Resolving Disputes
Industry stakeholders are pushing for significant reforms in trade facilitation and dispute resolution. ASSOCHAM calls for the effective implementation of a true 'single-window' system for import and export compliance, managed solely by customs to reduce border friction. Both organizations also advocate for measures to reduce litigation. ASSOCHAM suggests a customs amnesty scheme for legacy disputes, while Deloitte recommends fast-tracking Advance Price Agreements (APAs) to provide tax certainty for multinational corporations and mitigate transfer pricing conflicts.
Tax Simplification and Corporate Restructuring
In terms of tax policy, Deloitte suggests consolidating tax rates into three broad slabs: 0.1%, 2%, and 10%, and eliminating Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) on transactions already covered by GST. This aims to improve working capital for businesses. Additionally, industry bodies are seeking explicit tax neutrality for mergers and demergers, particularly fast-track demergers under Section 233 of the Companies Act, to encourage corporate restructuring without the apprehension of tax liabilities.
Impact
These pre-budget expectations, if implemented, could significantly boost India's manufacturing sector, attract foreign investment in high-tech areas, foster innovation, and enhance the ease of doing business. They aim to position India as a global manufacturing and innovation hub, improve trade competitiveness, and streamline corporate operations, ultimately contributing to sustained economic growth and formal employment. The focus on 'next-gen' capabilities and tax certainty signals a strategic push towards higher value-added economic activities.
Impact Rating: 9/10
Difficult Terms Explained
- PLI Programme: Production Linked Incentive scheme, offering financial incentives to companies based on their incremental sales of manufactured goods.
- GST: Goods and Services Tax, a unified indirect tax system in India.
- MNCs: Multinational Corporations, companies operating in several countries.
- GCCs: Global Capability Centres, offshore business units of MNCs that provide specialized services.
- DPDP Act: Digital Personal Data Protection Act, a law governing the processing of digital personal data in India.
- TDS: Tax Deducted at Source, tax deducted at the point of origin of income.
- TCS: Tax Collected at Source, tax collected by a seller at the time of sale of specified goods or services.
- APA: Advance Price Agreement, an agreement between a taxpayer and a tax authority regarding the methodology for pricing international transactions.
- CVD/SAD: Countervailing Duty/Special Additional Duty, types of customs duties.
- Gati Shakti: A master plan aiming to bring together various government ministries and departments for integrated infrastructure development.