NEW DELHI: This year’s Union Budget is also calibrated to cushion the economy against external shocks. With Indian exports hit by steep US tariffs under President Donald Trump and global trade disrupted by geopolitical flashpoints from the Red Sea to critical mineral supply chains, Finance Minister Nirmala Sitharaman has positioned the Budget sort of a shock absorber for jobs, manufacturing and trade.
Perhaps the clearest signal is the one-time relief for Special Economic Zones (SEZs). To prevent closures and job losses, manufacturing units in SEZs will be allowed to sell a limited portion of their output in the Domestic Tariff Area at concessional duty rates. The move directly addresses capacity under-utilisation caused by export markets turning unviable after the US imposed 50% tariffs on key Indian goods last August.
The pressure is real. India has 370 SEZs employing over 31 lakh workers, many in labour-intensive sectors. Over the past five years, 466 SEZ units have shut down, with the pace of distress accelerating as exports to the US became uncompetitive. Goods exports have already contracted for two consecutive months. The Budget focuses on cost relief and domestic demand substitution.
Customs duty cuts on inputs, support for manufacturing clusters and targeted sectoral schemes are aimed at keeping factories running and workers employed until global conditions stabilise.
Textiles one of the worst-hit sectors, is at the centre of this strategy. The Budget rolls out an integrated modernisation programme spanning fibres, machinery upgrades and common testing facilities.
The intent is clear: protect a sector that contributes "12% of exports and employs millions" mostly through MSME clusters operating on thin margins.
Similar logic applies to seafood, footwear and other labour-heavy exports.
Raising the duty-free input cap for seafood exporters from 1% to 3% directly offsets higher foreign tariffs, while extending duty-free imports to shoe uppers provides relief deeper in the value chain where small factories face the sharpest stress.
The Budget also looks beyond immediate tariffs to structural vulnerabilities exposed by geopolitics.
The Rs 10,000-crore container manufacturing scheme aims to reduce dependence on China, while duty exemptions for defence MRO, batteries, solar glass, critical minerals and nuclear power seek to lock in long-term supply security besides lowering production costs.
Markets, however, were reminded that stability comes with trade-offs.
A sharp hike in Securities Transaction Tax on derivatives sparked a sell-off, signalling the government’s willingness to curb speculative excess even at the cost of short-term volatility.
Taken together, the Budget’s message is unmistakable. As global trade fragments and tariffs rise, India is choosing "resilience over retaliation," using fiscal tools to protect jobs, preserve manufacturing capacity and ride out an increasingly volatile international trade environment.