Manufacturing sits at the heart of the Union Budget’s long-term economic strategy, with the government using it as a lever to build strategic resilience, strengthen the currency, and lower the cost of capital, Chief Economic Adviser V Anantha Nageswaran said.

Speaking at CII's Post Budget Session, Nageswaran said the emphasis on manufacturing reflects the reality of a more fragmented global economy. “The budget’s focus is on strategic resilience, which is about making sure that we are able to function even if the world doesn’t supply certain things to us,” he said, adding that this could remain “a fact of life for the next several years, maybe even a decade or two”.

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He pointed to targeted interventions across sectors that are critical to industrial self-reliance. These include rare earths mining, processing and manufacturing through a proposed rare earths corridor, domestic manufacturing of construction and infrastructure equipment, chemicals manufacturing, and the biopharma mission. Together, these initiatives aim to reduce import dependence while strengthening industrial depth. “These are definitely areas that will enhance our strategic resilience,” Nageswaran said.

Lowering input costs for industry is another pillar of the manufacturing push. The Economic Survey, he noted, flagged how cross-subsidisation raises costs for industry, an issue being addressed through reforms beyond the Budget. He cited the proposed Electricity Amendment Bill, which seeks to eliminate cross-subsidisation over time, as an example of reforms “happening outside the budget cycle” that support manufacturing competitiveness.

Within the Budget, reductions in customs duties and exemptions on components, parts and electronics form part of a broader input-cost reduction strategy. According to Nageswaran, these measures apply across both labour-intensive and high-tech manufacturing.

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The macro case for manufacturing-led growth

Beyond immediate incentives, Nageswaran underlined manufacturing’s macroeconomic importance, particularly for currency stability. “From the medium-term perspective, the way we address the rupee’s value is through boosting manufacturing,” he said. Citing international evidence from the post–Bretton Woods era (such as Germany, Singapore, the Netherlands, Switzerland, Japan), he noted that countries associated with strong and stable currencies are those that built deep manufacturing capabilities, while those that lost their “manufacturing mojo” saw weaker currencies over time.

Manufacturing also plays a central role in lowering the cost of capital. While financial market reforms are useful, Nageswaran argued that “what brings the cost of capital down in a meaningful way is to be able to become a manufacturer in our house.” Acknowledging that this is a long process, he said India must persist despite less favourable global conditions. “That doesn’t mean that we shouldn’t try… It only means we should try harder,” he said, stressing that the effort must be shared by both government and the private sector.