As Union Budget 2026 approaches, India is reassessing its supply-chain strategy amid rising imports, a widening trade deficit, and continued dependence on China across machinery, electronics, chemicals, and capital goods.

Policymakers are weighing a calibrated mix of higher customs duties and targeted incentives to reduce import reliance and de-risk sourcing, including intervention in around 100 high-dependence products.

A major focus is lowering logistics costs, which remain far higher than China’s, and strengthening MSMEs through better credit access, compliance simplification, and export support.

Budget priorities also include critical minerals, rare earth processing, semiconductors, and clean-energy supply chains. The aim is to move beyond reactive import substitution toward building competitive, resilient domestic ecosystems that can narrow—rather than manage—the China gap.