The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, brings opportunities and challenges for the Indian manufacturing sector. With a focus on economic growth, job creation, and technological advancement, this budget aims to strengthen India’s position as a global manufacturing hub. But how well does it align with the needs of manufacturers? Let’s take a closer look.
Shailesh Chandra, President of SIAM, noted, “We welcome this budget focused on long-term sustained economic growth. The specific focus on rural prosperity and agriculture, coupled with reforms in the Personal Income Tax, is likely to affect the Auto Industry positively and will help create demand. The National Manufacturing Mission will also support clean tech manufacturing for batteries, motors, and controllers, helping build a robust EV ecosystem in India.”
Ravi Prem, President of ICTMA, highlighted the measures supporting India’s startup ecosystem, saying, “The enhancement from ₹10 crore to ₹20 crore in Credit Guarantee Cover and the establishment of a ₹10,000 crore Fund of Funds will significantly support innovation and entrepreneurship. The government’s continued emphasis on startups and MSMEs reinforces India’s position as a global hub for high-value employment and technological advancements.”
Moreover, the budget’s reduced compliance burdens through simplified taxation and digital documentation will ease business operations for small and medium manufacturers. However, industry leaders argue that further tax relief for MSMEs could have catalyzed more substantial growth. But how well does it align with the needs of manufacturers? Let’s take a closer look.
Strengthening MSMEs: The Backbone of Indian Manufacturing
Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s manufacturing sector, contributing significantly to employment and exports. The enhanced Credit Guarantee Scheme raising the guarantee cover from ₹5 crore to ₹10 crore is a welcome move. This ensures better access to finance, enabling MSMEs to expand operations, invest in automation, and compete globally.
Jay Deepak Shah, CEO & MD of Jay Wood Industry, emphasized the importance of these initiatives, stating, “The Union Budget 2025 introduces transformative measures to bolster India’s MSME sector, reinforcing its pivotal role in establishing India as a global manufacturing hub. The allocation of ₹1.5 lakh crore over the next five years, along with term loans up to ₹20 crore and sector-specific financial support, will enable MSMEs to scale operations, invest in technological advancements, and drive employment generation.”
National Manufacturing Mission: Will It Drive India’s Growth?
The government has introduced the National Manufacturing Mission to accelerate industrial growth. This initiative is expected to promote the ‘Make in India’ agenda by supporting domestic industries, offering incentives for automotive, aerospace, electronics, and heavy engineering sectors, and improving supply chain infrastructure through better logistics and reduced import dependency.
Rajesh Shah, Chairman & Managing Director of Euro Panel Products Limited, believes this mission is a significant step forward. He stated, “The introduction of the National Manufacturing Mission will provide critical policy support to various industries, reinforcing India’s commitment to becoming a global manufacturing leader. Each infra ministry’s emphasis on coming up with a three-year list of PPP projects will be an era-appropriate move, furthering the National Manufacturing Mission and Make in India initiatives.”
Venkatesh Mudragalla, Co-founder and COO at Jeh Aerospace emphasized the impact of the Modified UDAAN Scheme, stating, “Adding 120 new destinations and four crore additional passengers will significantly enhance regional connectivity and logistics. Alongside this, the National Manufacturing Mission under Make in India will drive India’s manufacturing growth by increasing its GDP contribution from 16% to over 20%.”
Infrastructure & Logistics: Lowering Manufacturing Costs
Logistics and infrastructure play a crucial role in enhancing the efficiency of the manufacturing ecosystem. The ₹1 lakh crore Urban Challenge Fund aims to develop sustainable industrial zones and smart cities, directly benefiting manufacturers by reducing production and transportation costs.
Additionally, road, rail, and port connectivity investments will boost supply chain efficiencies. Faster movement of goods ensures reduced lead time, allowing manufacturers to improve productivity and competitiveness in global markets.
Nikhil Mansukhani, Managing Director of Man Industries Ltd., remarked, “The ₹1.5 lakh crore interest-free loan for infrastructure and PPP projects will improve logistics, reduce bottlenecks, and boost multimodal connectivity, which is crucial for industries such as steel, oil & gas, and heavy engineering.”
Green Initiatives & The AI Push in Manufacturing
The allocation of ₹500 crore for a Centre of Excellence in Artificial Intelligence (AI) is a futuristic move that could revolutionize manufacturing. Combined with automation and Industry 4.0 technologies, AI will enhance precision in CNC machining, robotics, and quality control, enable predictive maintenance, reduce factory downtime, and foster innovation through AI-driven product design and development.
Sustainability is becoming a crucial aspect of manufacturing, and this budget addresses it through Aatmanirbharta in Pulses, which aims for self-sufficiency in agriculture, benefiting food processing industries. Investment in renewable energy policies promoting solar, hydrogen, and other green energy sources will help manufacturers transition towards eco-friendly production. Additionally, incentives for energy-efficient machinery and practices will encourage industries to invest in sustainable technology.
Hiren Pravin Shah, Founder & CEO of Replus Engitech, welcomed the push for clean tech, stating, “The increase in import duties on EV batteries and the government’s focus on local manufacturing of grid-scale battery technology aligns perfectly with India’s Atmanirbhar Bharat vision.”
Industry Reactions: What Manufacturing Leaders Say
S Sunil Kumar, Country President of Henkel Adhesive Technologies India, said, “The rationalization of customs tariffs will enhance India’s global competitiveness, particularly benefiting manufacturers, while the focus on MSMEs will empower them to diversify offerings and expand internationally.”
Jaikaran Chandock, Director of Balu Forge Industries Ltd., highlighted the importance of defence manufacturing support, stating, “The budget’s allocation towards AI and deep-tech innovation in the defence sector will create a future-ready talent pipeline and strengthen India’s precision engineering capabilities.”
Sanjeev Dasgupta, CEO of CapitaLand Investment (India), summed it up well: “The Union Budget 2025 charts a decisive path for India’s next phase of economic growth, reinforcing its position as a global investment and business powerhouse.”
Conclusion: A Step Forward, But More Needed
The Union Budget 2025 brings positive momentum for the manufacturing sector, particularly in infrastructure development, AI integration, and MSME credit access. However, it falls short in providing direct tax incentives and relief measures that could have further accelerated industrial growth.
For India to become a truly global manufacturing powerhouse, continuous policy support, more straightforward business regulations, and tax incentives will be crucial in the coming years. The industry now looks forward to how effectively these budget allocations will be implemented.
