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In this episode of Budget Insights, a podcast series from EY India Insights, Saurabh Agarwal, Partner, Tax, EY India shares his views on what Budget 2026 could include to allow manufacturing to grow further through PLI scheme and other programs. He emphasizes that incentives must follow technology changes to lead to long-term value. In addition, attractive taxation can bring in higher foreign investments, which would lead to manufacturing growth.
Key takeaways
Budget 2026 could announce a second wave of schemes for semiconductors, lithium-ion battery ecosystem and automotive sector.
These initiatives can drive innovation and self-sufficiency in critical technologies.
New technology schemes offer vast potential for expanding PLI into space tech and AI.
Tax certainty and attractive tax rates would position India as Asia's most competitive manufacturing destination
Budget 2026 must focus on execution velocity (of programs) to stay ahead of the fragmented global landscape.
Saurabh Agarwal
Partner, Tax, EY India
For your convenience, a full text transcript of this podcast is available on the link below:
Pallavi
Welcome to Budget Insights, a podcast series from EY India Insights, where we share perspectives on key policy developments shaping India’s economic and business landscape.
I’m your host, Pallavi, and in today’s pre-Budget episode, we focus on expectations, priorities, and potential focus areas for India’s manufacturing sector ahead of the upcoming Union Budget 2026.
We are pleased to be joined by Saurabh Agarwal, Partner, Tax, EY India who brings deep experience and strong insights into manufacturing, investment policy and the evolving regulatory environment. In this episode, Saurabh will share his perspectives on how the Union Budget can strengthen India’s manufacturing base, the future of incentive frameworks such as PLI, and the role of tax certainty and compliance simplification in attracting sustained private investment.
Thank you, Saurabh, for joining us today! It’s a pleasure to have you here.
Saurabh Agarwal
Thank you, Pallavi.
Pallavi
Saurabh, to begin with, how can Union Budget 2026 strengthen India's manufacturing base through targeted incentives and policy stability?
Saurabh Agarwal
If you look at it overall, the way the global landscape is working and the global tensions all across, the focus of various governments is to strengthen their manufacturing and also explore possible manufacturing in different parts of the world. If you look at all these things holistically, India's manufacturing story today is at a vital inflection point.
While we have committed a massive INR2.9 lakh crore to INR3 lakh crore across 20 PLI schemes/programs, the bridge between allocation and actualization (is needed). It is important to understand that only INR25,000 crore has been estimated to be disbursed by the financial year 24-25 claims are concerned. Therefore, the Budget 2026 must focus on execution velocity to stay ahead of the fragmented global landscape.
We have seen a stellar success in mobiles, semiconductors and food PLI schemes. But similar types of schemes may not help in sectoral growth in other sectors. Therefore, we need to look from two perspectives. First, operational flexibility: By virtue of reviewing the existing schemes to lower entry barriers and simplifying the domestic valuation norms till the time the overall ecosystem gets developed for a particular sector in India.
Second, whatever schemes have been announced so far, all the budgets have been allocated. Say, toys and footwear scheme. These are labor intensive sectors and can result in massive employment. It is important for the government to release the granular details of these schemes so that these budgets can be effectively utilized.
Pallavi
Thank you, Saurabh. Do you see any scope for expanding incentive frameworks like PLI to newer technology driven manufacturing sectors?
Saurabh Agarwal
Pallavi, you know, one thing I have said time and again is the second wave of these schemes in three sectors. First is semiconductors. It is very important for any nation to have semiconductor self-reliance or a display fab self-reliance. Second is our battery ecosystem, which is the lithium ion battery ecosystem. And third is a revised or maybe a second version of our automotive and automotive component PLI scheme.
What is vital now is that our focus should move beyond assembly to high-end deep tech manufacturing. But that will happen over a period of time, maybe over a period of 2 to 4 years, and may not be in the initial years where the value additions will be lower. But over a period of time, as the ecosystem develops, the value addition becomes high.
Second thing, when you see the new frontiers or new technology schemes, there is an immense scope to expand PLI to space tech, AI-led robotics and semiconductor ecosystem. So, these are some of those areas where the next industrial revolution is likely to come from, and therefore the incentives must follow the technology.
Pallavi
Thank you, Saurabh. Lastly, how critical is tax certainty and compliance simplification in attracting sustained private investment into manufacturing?
Saurabh Agarwal
Taxes in India have historically been a maze. However, if you look at the last decade, the intent of the policy makers and leadership is clear: Move from tax uncertainty to tax certainty by way of transparency. When you say certainty, it is important to understand why certainty matters. Investors do not just look at the rate. They look at the risk of the change. They assess the risk of the change. The decisions are taken to invest in a particular country or not. If you have to ask for two big tax changes from this Budget, it would be: First is the 15% question, which my clients keep on asking. There is a loud call to reintroduce or extend the 15% concessional corporate tax rate for new manufacturing units. This was something of a masterstroke, which expired in 2024. Reviving it in Budget 2026 would be a massive signal to global CEOs that India is the most tax competitive destination in Asia.
Next thing is simplifying compliance. We are hearing about a move to reduce customs duty slabs from eight to somewhere around five or six. We have witnessed similar changes in case of GST rate rationalization.
This is not just a number game. It reduces classification disputes that currently clog our courts. What is important from a customs duty perspective is the phased manufacturing program. It has worked wonders for mobile phone and mobile component industry. We started by taxing Finnish handsets at a higher rate and keeping parts cheap. Then we slowly increased duties on parts to force local production. Once the domestic manufacturing of mobile phones got stabilized, we have again brought down the duty rate on finished handsets, thereby providing a level playing field to a foreign manufacturer and an Indian manufacturer.
Pallavi
Thank you, Saurabh. That brings us to the end of this episode. And thank you for sharing your valuable insights on the pre-Budget perspectives. Your views provide important context and expectations from the Union Budget 2026, particularly around the manufacturing growth, policy stability and the investment enablement.
Saurabh Agarwal
Thank you, Pallavi.
Pallavi
Thank you to all our listeners for tuning into the Budget Insights as part of our EY India Insights series. Stay connected with us for but Post-Budget analysis and expert commentary on how policy developments impact businesses and the broader economy. Until next time, this is Pallavi signing off.
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