Union Budget 2026: Major Duty Cuts to Boost India's Manufacturing

On Sunday, Finance Minister Nirmala Sitharaman announced a reduction in the Basic Customs Duties (BCD) across multiple items to help reduce inverted duty structures and support domestic manufacturing.

The specific products being affected by these reductions are deemed to be priority areas for government investment (e.g., textiles, leather, and marine) and are labour-intensive sectors in which the government is striving to provide relief.

One of the most important updates that will occur as a result of this announcement will be to increase the duty-free import limits for various inputs used by exporters within the seafood processing industry from 1 percent to 3 percent of their Free On Board (FOB) value based on the exporters' previous year's gross export turnover. With this change, exporters within the seafood processing sector will have more flexibility in sourcing their required inputs.

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In addition, Minister Sitharaman has also proposed the extension of the current exemption from BCD for the export of leather and synthetic shoes to include the export of shoe uppers. The objective of this proposal is to support the footwear sector, which is currently confronting numerous difficulties in non-Indian markets.

Finally, this announcement is being made at a time when the Indian manufacturing sector is under significant stress, which has been exacerbated by the 50 percent tariffs imposed on imports into the USA since August 2025.

As the country negotiates a free trade agreement with the US, these steps by the government are seen as vital in helping reduce input costs and strengthening domestic industries. Manufacturers have long called for such measures to ease structural barriers to growth.