Budget 2026 places renewed emphasis on the labour-intensive textile sector, especially in the context of new market access opportunities arising from the recently concluded free trade agreements with the UK and the European Union | Photo credit: PERIASAMY M
By prioritizing structural reforms, productivity gains, stronger global trade ties, infrastructure development and aligned policy engagement, Budget 2026 places competitiveness at the center of India’s growth strategy. Sustained rural demand, improved agricultural production and productivity, declining food inflation and a stable macroeconomic framework are the foundation for resilient economic growth.
Against this backdrop, Budget 2026 places renewed emphasis on the labour-intensive textile sector, especially in the context of new market access opportunities arising from the recently concluded Free Trade Agreements (FTAs) with the United Kingdom and the European Union. It outlines an integrated roadmap to strengthen self-reliance in natural fibers such as silk, wool and jute, while also supporting man-made and next-generation fibres. Key measures include the modernization of traditional textile clusters through capital investments in machinery, technology injection, common testing and certification facilities, and targeted support for weavers and artisans through better program convergence.
By addressing long-standing competitiveness and skills gaps, the Budget signals a strategic shift. With inherent cost advantages and enormous potential for value addition, the Indian textile industry can emerge as a global powerhouse if it decisively adopts Industry 4.0 practices, deepens collaboration with academic and research institutions and accelerates the establishment of mega-textile parks through a competitive, challenge-driven framework.
The 2026 Budget also recognizes a crucial reality: village industries are steadily losing ground due to competition from mechanized production, vulnerable infrastructure, weak market access and limited exposure to modern skills. Low productivity due to outdated technology, limited credit availability, inadequate branding, poor logistics, labor migration and weak integration with contemporary value chains continue to limit their growth.
In response, the Mahatma Gandhi Gram Swaraj Initiative has proposed to strengthen it Khadihandlooms and handicrafts represents a timely intervention. By focusing on global market linkages, branding, training, skills and quality improvement, the initiative aims to benefit millions of weavers, village businesses, one-district, one-product clusters and rural youth. Crucially, this may prompt the Khadi and Village Industries Commission (KVIC) to initiate amendments to the KVIC Act, 1956, supported by statutory measures for market and export facilitation, infrastructure provision, credit and risk mitigation instruments, outcome monitoring, integration of workers’ social security and decentralization – laying the foundation for community-led entrepreneurship.
Growth through MSMEs
Budget 2026 goes beyond cluster revival and takes a more holistic approach to SME competitiveness. Besides proposing to rejuvenate 200 old industrial clusters through infrastructure and technology upgrades, it envisages setting up of champion SMEs, a dedicated SME Growth Fund of ₹10,000 crore and an additional allocation of ₹2,000 crore to the Self-Reliant India Fund to secure micro-enterprises’ access to venture capital. By proposing a high-level committee to review the banking sector as part of the Viksit Bharat agenda, the Budget signals its intention to align financial sector reforms with the evolving growth needs of the economy. The commission’s recommendations can help identify flexible and credible pathways for future expansion without compromising financial stability, inclusion or consumer protection.
Innovative liquidity measures – making TReDS mandatory for Central Public Sector Enterprises (CPSE) procurement arrangements, expanding Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)-backed credit guarantees for invoice discounting, and linking the government’s e-Marketplace (GeM) with TReDS for information sharing – are expected to ease working capital constraints for MSMEs. In combination with professional support via ‘cooperative mitras in Tier-II and Tier-III cities can take these steps to strengthen MSMEs, deepen linkages across value chains and increase income, employment and wealth creation at scale.
Scaling up and modernizing livestock farms, in addition to promoting farmer producer organizations in livestock and dairy farming, is a strategic move to strengthen community-led entrepreneurship and expand employment in rural and suburban areas. Focused on high value crops viz. Coconut, sandalwood, cocoa, cashews and nuts will further encourage local investment, build grassroots businesses, increase productivity and diversification, increase farmers’ incomes and create new jobs.
The proposal to establish five university townships along major industrial and logistics corridors can significantly bridge the skills gap by promoting closer collaboration between industry, academia and policymakers. Such an ecosystem would enable technology-driven skill development while enhancing industrial growth, ensuring business competitiveness and advancing India’s journey towards the Viksit Bharat vision by 2047.
Further, the Budget reinforces the government’s focus on revitalizing the cooperative sector by easing tax burden and encouraging member-centric surplus sharing. It also facilitated policy support that recognizes cooperatives as essential tools for inclusive and community-led growth. The Budget seeks to revive industry and manufacturing as pillars of economic transformation.
By aligning policy intervention with the Make-in-India vision and the long-term goal of Viksit Bharat 2047, the Budget seeks to create achievable and inclusive growth pathways. The emphasis on SMEs and rural development as growth engines underlined a people-centred approach – one that can translate ambition into action and build a resilient, self-sustaining, inclusive economy, while ensuring that the benefits of development are shared widely and equitably.
Dev is chairman and Tripathy is joint secretary in the Prime Minister’s Economic Advisory Council. Opinions are personal
Published on February 3, 2026
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