5. Exports and Manufacturing in Union Budget 2026-27: Building Global Trade Resilience

The Union Budget 2026-27 positions exports as the primary engine for \'Viksit Bharat,\' focusing on high-tech manufacturing, MSME scaling, and structural reforms to integrate India into Global Value Chains (GVCs).• Strategic Manufacturing Push: The budget launches flagship missions like Biopharma SHAKTI (outlay of ₹10,000 crore) and India Semiconductor Mission (ISM) 2.0. These initiatives aim to move India up the value chain from mere assembly to indigenous IP creation and full-stack manufacturing in strategic sectors. • Special Economic Zone (SEZ) Reforms: To improve capacity utilization, a one-time relief allows SEZ units to sell a portion of their output in the Domestic Tariff Area (DTA) at concessional duty rates. This measure addresses global trade disruptions while maintaining the export-oriented character of these zones. • Empowering MSME Exports: A ₹10,000 crore SME Growth Fund has been unveiled to provide equity support to potential \'champion\' MSMEs. Additionally, the mandatory use of the TReDS platform by Central Public Sector Enterprises (CPSEs) aims to solve the chronic issue of delayed payments and liquidity crunch. • Services Sector Leadership: The budget sets an ambitious target of capturing 10% of global services exports by 2047. Key reforms include a unified classification for IT services, tax holidays for foreign cloud service providers using Indian data centers, and the creation of Global Capability Centres (GCCs). • Logistics and Infrastructure Decoupling: To reduce high logistics costs, the budget emphasizes Dedicated Freight Corridors (DFCs), National Waterways, and coastal shipping. Digital interventions like electronic sealing of export cargo and non-intrusive scanning are set to replace the traditional \'Inspector Raj\' at ports. • Trade Facilitation for Small Exporters: The removal of the ₹10 lakh value cap on courier exports is a landmark move for e-commerce, enabling small artisans and MSMEs to access global markets directly with minimal bureaucratic friction. Key Definitions • Biopharma SHAKTI: A new scheme focused on the domestic production of biologics and biosimilars to make India a global pharmaceutical R&D hub. • Safe Harbour Rules: Provisions that provide tax certainty to foreign investors by specifying certain price limits or profit margins that the tax authorities will accept without further audit. • TReDS (Trade Receivables Discounting System): An electronic platform for facilitating the discounting of trade receivables of MSMEs from corporate and other buyers through multiple financiers. • Global Value Chains (GVCs): International production networks where different stages of the production process are located across different countries. Constitutional and Legal Provisions • Article 246 (Seventh Schedule): Trade and commerce with foreign countries; import and export across customs frontiers fall under the Union List (Entry 41). • SEZ Act, 2005: Provides the legal framework for SEZs; recent budget proposals suggest a shift toward the \'DESH\' (Development of Enterprise and Service Hubs) model for better domestic integration. • MSME Development Act, 2006: Governs the classification and promotion of MSMEs; budget reforms strengthen the \'delayed payments\' protection under this Act. • Customs Act, 1962: Provides the legal basis for duty exemptions and trade facilitation measures like the Authorized Economic Operator (AEO) program. Additional Keypoints for Analysis • Rare Earth Corridors: Establishment of corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to secure the supply of critical minerals for EV and defense manufacturing. • Corporate Mitras: A new cadre of professionals (CAs, CSs) to be trained to assist MSMEs in Tier-II and Tier-III cities with complex compliance requirements. • Container Manufacturing: A ₹10,000 crore program to reduce dependency on foreign shipping containers and build a domestic ecosystem for maritime trade.Conclusion The Union Budget 2026-27 marks a shift from \'protective\' trade policies to \'competitive\' integration. By addressing the triple challenges of high logistics costs, credit gaps for MSMEs, and technological gaps in strategic manufacturing, the government aims to transform India into a reliable alternative to global supply chains. However, the long-term success will depend on the ground-level implementation of SEZ-DTA parity and the speed of infrastructure execution. UPSC Relevance • GS Paper III: Indian Economy (Changes in industrial policy and their effects on industrial growth); Government Budgeting; Infrastructure (Logistics, Ports). • GS Paper II: Effect of policies and politics of developed and developing countries on India’s interests (Trade wars and GVCs). • Prelims: Specific schemes (ISM 2.0, Biopharma SHAKTI), TReDS, AEO status, and the location of Rare Earth Corridors.