Bengaluru, Feb 2 (.) Industry captains on Monday raised concerns over the real-world impact of India’s union Budget, highlighting that it falls short in supporting manufacturing, MSMEs, and high-tech startups—sectors critical for economic growth and employment.
Industry captains noted that while the country has a potential advantage over the next 25 years, the middle class, particularly in IT, has plateaued, and growth has slowed to mid-single digits. With the next phase of growth expected from manufacturing, they questioned whether the budget provides adequate measures to support the sector. “Honestly, we have to look at a microscope—there’s virtually nothing at the micro level,” they said in a panel discussion at BCIC Post-Budget Analysis of the union Budget 2026-2027.
Despite heavy promotion of the “Make in India” initiative over the last five to seven years, manufacturing accounted for only 16.6% of GDP in 2012–2013 and stands at 17.5% today. The Production-Linked Incentive (PLI) scheme exists, but only 12% of promised funds have been disbursed, and companies face complex rules and product classification issues.
While infrastructure improvements like roads and initiatives such as “China plus one” may improve supply chains, industry captains described them as too limited to create real impact. Traditional manufacturing, such as container production, lags far behind global competitors, and tool rooms remain underfunded and understaffed, limiting overall performance. Government support barely touches ₹5,000 crores, far below the scale needed for meaningful change.
MSMEs, which generate 62% of all jobs, also face major challenges despite their key role in employment. Industry captains highlighted that MSMEs maintained staff during the COVID-19 pandemic, unlike some large corporations that resorted to layoffs.
Regulatory hurdles—including multiple approvals for environmental and fire safety compliance, inconsistent state-level incentives, and lack of scale—continue to hinder growth. They emphasized that government procurement could provide significant relief: even allocating 25% of purchases to MSMEs would give them cash flow certainty. Fear of failure, complex rules, and limited access to financing further restrict the sector’s potential. Standardized support, streamlined regulations, and guaranteed government procurement are seen as critical steps to transform MSMEs into sustainable employment engines.
Startups, particularly in AI and high-tech industries, face additional constraints related to talent, energy, and infrastructure. India has numerous universities, but only around 10 are capable of frontier research. Bureaucratic requirements, such as GST and DSIR compliance, block effective grant utilization.
Talented researchers abroad hesitate to return due to taxation on foreign income and restrictive definitions of “expert.” Energy availability is inconsistent, with solar generation present but minimal storage, outdated EV charging standards, and political interference affecting private investment. Infrastructure gaps, such as fragmented regulations for data centers and industrial zones, weak intellectual property protection, and lack of a national framework, expose startups to litigation and operational risks.
Private investment, industry captains said, depends on consistent incentives and regulatory clarity. Since 1991, capital flows in India have historically followed incentive structures, but today, much private capital remains idle in bank accounts due to uncertainty.
Startups require long-term visibility, and retrospective or abrupt rule changes erode investor trust. While incentives for data centers have been clarified until 2047, broader policy consistency is lacking, heightening fears of regulatory and litigation risks.
Overall, experts argue that the budget serves largely as a statement of intent rather than actionable execution. Low-hanging reforms could have been implemented to ease private enterprise, yet government interference often slows progress.
Sectors like IT services, manufacturing, MSMEs, and startups require long-term clarity, consistent policies, infrastructure support, and financial incentives to realize India’s demographic dividend and emerge as a global growth engine. Without such measures, experts warn, India risks underutilizing its talent and capital, and missing a crucial decade for growth.
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