Budget 2026 Introduces Comprehensive Customs Duty Reforms to Strengthen Indian Economy
In a significant move aimed at revitalizing India's industrial and export sectors, Union Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 with a series of transformative customs duty changes. These measures are designed to lower input costs, ease compliance burdens, and enhance export competitiveness across multiple key industries, marking a strategic shift in the government's approach to supporting domestic manufacturing and trade.
Key Announcements for Export-Oriented Sectors
One of the most notable announcements in Budget 2026 is the increase in the duty-free import limit for inputs used in processing seafood exports. The government has raised this limit from the current 1% to 3% of the free-on-board (FOB) value of the previous year's export turnover. This adjustment is expected to provide substantial relief to marine exporters who have been grappling with escalating input costs, thereby boosting their global competitiveness.
Additionally, the budget extends the duty-free import facility for the leather and footwear sector. Previously available only for exports of leather or synthetic footwear, this benefit will now encompass exports of shoe uppers. This expansion offers manufacturers greater flexibility in sourcing inputs, potentially streamlining production processes and reducing operational expenses.
Extended Timelines and Broader Exemptions
In a major relief for exporters, Budget 2026 extends the time period for duty-free export of final products from six months to one year. This extension applies to exporters of leather or textile garments, leather or synthetic footwear, and other leather products. By addressing long-standing industry concerns around production timelines and compliance pressures, this measure aims to foster a more conducive environment for export growth and sustainability.
Beyond export-focused industries, the budget proposes exemptions from basic customs duty on raw materials imported for manufacturing aircraft parts used in maintenance, repair, and overhaul activities within the defence sector. This step is intended to strengthen domestic defence capabilities and reduce reliance on imports, aligning with broader national security objectives.
Rationalization and Public Welfare Measures
To deepen value addition in consumer electronics manufacturing, the finance minister announced an exemption from basic customs duty on specified parts used in microwave oven production. This move is expected to encourage local manufacturing and innovation in the electronics sector.
Furthermore, the budget seeks to rationalize the customs duty structure for individuals by reducing the tariff rate on all dutiable goods imported for personal use from 20% to 10%. This reduction is anticipated to simplify compliance procedures and alleviate the cost burden on passengers, making international travel and shopping more accessible.
In a compassionate gesture aimed at providing relief to patients, particularly those suffering from cancer, the government proposed to exempt basic customs duty on 17 essential drugs and medicines. This measure underscores the budget's focus on public welfare and healthcare accessibility.
Broader Policy Recalibration and Industry Impact
The budget also includes the withdrawal of nearly 50 products from mandatory quality control order (QCO) requirements. This decision is expected to ease compliance burdens, encourage manufacturing activity, and facilitate smoother imports of raw materials without procedural obstacles.
According to trade economist and Delhi University assistant professor Abhash Kumar, "The package of measures reflects the government's broader attempt to align customs policy with manufacturing, export promotion, and public welfare objectives, while easing cost pressures across sectors facing global competition and domestic capacity constraints."
These reforms are seen as part of a comprehensive recalibration of India's industrial and trade policy, aimed at improving supply chain resilience and lowering input constraints for domestic producers. As the geopolitical environment evolves, such steps are crucial for positioning India as a competitive player in the global market.
