Building strategic indispensability: How Budget 2026-27 deepens India’s global value chain role

India’s Union Budget 2026-27 signals a clear shift in how the country positions itself within global value chains. As production decisions are increasingly shaped by supply reliability, regulatory compliance, and capability depth, the Budget moves beyond cost competitiveness and incentive-led growth toward strengthening the foundations for ecosystem-led, durable participation in global production networks.

Rather than chasing export volumes alone, the Budget focuses on raising India’s value-added share by embedding domestic firms deeper into design, materials, components, logistics, healthcare, and services. Backed by sustained public capital expenditure and targeted investments in electronics, biopharma, and MSME supplier development, this system-wide approach improves supplier depth, reduces operational friction, and enhances predictability for global manufacturers. It aligns with the Economic Survey 2025-26’s articulation of “strategic indispensability”, where deeper integration into global value chains supports more stable and repeatable export earnings over time.

Manufacturing: From assembly to strategic depth

A persistent constraint in India’s GVC participation has been the “missing middle”, limited domestic capacity in materials, components, tooling, and equipment that sit upstream of final assembly. Budget 2026-27 addresses this gap directly by prioritising sectors and capabilities that allow India to move beyond output expansion towards building components, subsystems, and platform roles that global value chains cannot easily replace.

The expansion of the semiconductor and electronics components ecosystem, rare earth permanent magnet corridors across mineral-rich states, chemical parks, container manufacturing, construction and infrastructure equipment, and hi-tech tool rooms signals a shift from scale-driven manufacturing to technology-intensive depth. These investments strengthen domestic sourcing, shorten commissioning timelines, and reduce dependence on imported intermediates, areas where Indian manufacturing has historically faced bottlenecks.

The rare earth corridors, structured around mining, processing, chemical inputs and magnet manufacturing on a cluster-based model, are particularly critical for EVs, renewables, electronics and defence supply chains. Developing these ecosystems domestically improves supply security and positions India more firmly within strategic industrial value chains.

Equally important is the INR 20,000 crore commitment to carbon capture, utilisation and storage (CCUS) across power, steel, cement, refineries and chemicals. As global buyers tighten Scope 3 emission requirements, decarbonisation is no longer optional; it is a market access condition.

By de-risking green transition pathways in heavy industry, the Budget future-proofs India’s manufacturing base for continued integration into regulated global markets.Targeted customs duty exemptions for lithium-ion cells including energy storage systems, solar glass inputs, nuclear power equipment, and capital goods for critical mineral processing further localise upstream supply chains and stabilise input costs, lowering landed costs and improving cost predictability for exporters. Collectively, these measures move India closer to being a strategic production node rather than a substitutable assembly location.

Ports, logistics and corridors: Reducingtime, expanding reach, lowering costs

In global value chains, time reliability matters as much as cost. India’s logistics reforms in Budget 2026-27 recognise this reality and directly address long-standing bottlenecks that affect speed-to-market and supplier reliability.

The proposed Dedicated Freight Corridor linking Dankuni to Surat strengthens east-west connectivity, tying mineral and manufacturing clusters directly to export gateways. Complementing this is the operationalisation of 20 National Waterways, beginning with Odisha, connecting Talcher, Angul and Kalinganagar to ports such as Paradeep and Dhamra. This materially lowers logistics costs for bulk and industrial cargo while easing pressure on rail and road networks.

The Coastal Cargo Promotion Scheme aims to double the modal share of coastal and inland waterways from 6 per cent to 12 per cent by 2047, signalling a long-term shift toward more efficient freight movement.  Ship-repair ecosystems at inland nodes like Varanasi and Patna, alongside dedicated training institutes, address a frequently ignored bottleneck, the availability of skilled maritime and logistics manpower.

For global buyers, predictability at ports is as critical as physical connectivity. The rollout of a single, interconnected digital customs window, operationalising approvals for food, drugs, plant and animal products by April 2026, and the phased implementation of a Customs Integrated System (CIS) with AI-enabled non-intrusive scanning directly target dwell times, discretionary interventions, and clearance uncertainty, accelerating approvals and reducing compliance risk.  Together, investments in logistics infrastructure, MSME financing, digitised compliance, and faster approvals address long-standing bottlenecks in supplier depth, working capital, and speed-to-market.

Export enablement: Small fixes, large impact

Several export-facing measures may appear incremental, but their cumulative impact on GVC participation is significant. The removal of the courier export value cap unlocks higher-value cross-border e-commerce, allowing smaller firms to plug into global demand without scale barriers. Extended timelines for exporting duty-free input-based products, expanded duty-free input limits for seafood, and inclusion of shoe uppers under leather export incentives improve order fulfilment rates and working-capital cycles.

The one-time window allowing SEZ manufacturing units to sell into the domestic tariff area at concessional duty is particularly important in a volatile global demand environment. It preserves capacity utilisation and employment while maintaining a level playing field, supporting faster price-volume conversion and sustained plant utilisation in global supply networks.

MSMEs: Strengthening the feeder network

The INR 10,000 crore SME Growth Fund, the top-up to the Self-Reliant India Fund, mandatory use of TReDS for CPSE procurement, credit guarantees for invoice discounting, integration of government procurement data with financing platforms, and the introduction of Corporate Mitras together tackle three chronic issues, equity scarcity, receivables friction, and compliance burden.

By improving working capital availability and supplier readiness, these measures strengthen India’s tier-2 and tier-3 supplier base, an essential requirement for capturing China+1 and diversification-led sourcing opportunities.

By integrating Tier-2 and Tier-3 suppliers more deeply into formal value chains, the Budget improves domestic sourcing, shortens commissioning timelines, and reduces landed costs for global buyers.

Services as a GVC multiplier

India’s services advantage is being deliberately aligned with manufacturing value chains. The tax holiday till 2047 for foreign companies exporting global services using Indian data centres, combined with safe harbour provisions and transfer pricing clarity for IT and digital services, significantly lowers the cost of anchoring high-value service hubs in India.

This dovetails with investments in

biopharma manufacturing, a nationwide clinical trials network, regulatory capacity strengthening in healthcare, medical value tourism, design institutions, and AVGC ecosystems, positioning India not just as a production base, but as a solutions provider across R&D, engineering, analytics, and regulated services.

The GVC flywheel in motion

Taken together, Budget 2026-27 sets a clear flywheel in motion:

• Building upstream industrial depth in materials, components, tooling and equipment, shifting India’s positioning from cost-led manufacturing to capability-led production.
• Reducing border and logistics uncertainty through freight corridors, digital customs, and trust-based trade facilitation, moving the system from friction to predictable flow.
• Connecting factories, MSMEs and industrial clusters to markets through ports, corridors and city economic regions, transitioning from isolated scale to integrated systems.
• Embedding data, R&D, healthcare and digital services alongside manufacturing activity, turning services from support functions into value-creating solutions.
• Using decarbonisation, critical minerals processing and clean energy enablers to secure market access, converting green compliance into a competitive advantage.

Execution will decide the outcome

Budget 2026-27 is unambiguously a supply-side Budget with an execution bias. Its success will not be measured by headline allocations alone, but by how quickly customs systems are digitised, corridors operationalised, healthcare and MSME ecosystems scaled,

and sector schemes translated into capacity on the ground. If implemented at pace, India can move from being a participant in global value chains to becoming a platform where design, manufacturing, healthcare, logistics and services co-locate and compound, attracting higher-quality FDI and deeper local value addition.

As the Economic Survey makes clear, when factories can prove reliable, standard-compliant, traceable, and scalable output, GVCs do not merely include India, they begin to depend on India. As the Economic Survey cautions, the real test will be whether announced investments translate into repeatable, standard-compliant, and traceable output that global buyers can rely on at scale.

Writer is a Partner and Global Value Chain Ecosystem, Grant Thornton Bharat; views are personal