India's Strategic Manufacturing Push Amid Global Tensions

Mon Feb 02 2026 15:54:10 GMT+0200 (Eastern European Standard Time)

In light of rising global uncertainties, India unveils a budget that emphasizes infrastructure growth and a significant push towards local manufacturing in critical sectors, including rare earths and data centers.

Finance Minister Nirmala Sitharaman's budget for 2026-27 outlines increased spending on infrastructure and defense, signaling a robust domestic manufacturing strategy. Key focuses include expanding capabilities in rare earths, semiconductors, and data centers, with incentives aimed at attracting foreign investment and enhancing export competitiveness.

India's Finance Minister Nirmala Sitharaman has presented her annual budget for 2026-27, announcing a strategic focus on higher infrastructure spending and local manufacturing to bolster the economy amid global uncertainties.

Anticipated to conclude this financial year with a 7.4% GDP growth, India is bracing for a modest slowdown in the upcoming year as U.S. tariffs impact Indian exports.

The budget emphasizes fiscal restraint, aiming for a lower deficit while increasing capital outlays, particularly in infrastructure (projected at 12.2 tn rupees) and defense (over 20% increase) to address geopolitical tensions.

Key strategic sectors set for manufacturing boosts include semiconductors and rare earths, with SCC announcing dedicated corridors for mineral extraction in four states and a proposed tax holiday for foreign cloud companies investing in data centers.

Furthermore, while the budget prioritizes infrastructure and manufacturing, it refrains from introducing new tax giveaways, focusing instead on enhancing competitive capabilities in the evolving global market landscape.

Despite signs of fiscal discipline, the announcement was met with disappointment in financial markets due to an increase in the Securities Transaction Tax affecting derivative trading.

The commitment to enhancing India's domestic manufacturing prowess, especially in strategic sectors, marks a significant step toward reducing dependency on foreign imports and bolstering economic resilience amid ongoing global challenges.