The Union Budget 2026-27, presented by finance minister Nirmala Sitharaman, sets a strong macroeconomic foundation that will significantly influence India’s consumer products and retail sector. With GDP growth projected to remain robust, the government continues its strategy of disciplined fiscal consolidation. The budget’s focus is on lowering the fiscal deficit, maintaining growth-supportive public spending, and prioritising infrastructure, manufacturing investment, and supply-chain efficiency. Moreover, sustained capital outlay directly enhances cost-efficiency for consumer goods companies.

Electronics manufacturing: Strengthening domestic competitiveness

A key direct announcement for the consumer products sector is the expansion of the Electronics Components Manufacturing Scheme (ECMS). Initially launched with ₹22,919 crore, the outlay has now been increased to a substantial ₹40,000 crore to strengthen India’s electronic components ecosystem. The basic customs duty on specified microwave oven parts has also been exempted.

The Budget 2026-27 also introduces incentives in the form of a five-year income-tax exemption for non-residents supplying capital goods, equipment or tooling to contract manufacturers producing electronic goods operating in a custom-bonded area. These measures strengthen India’s value proposition for contract manufacturing. As supply chains become more efficient, global brands could likely shift a greater share of their contract production to India.

These moves could reinforce India’s position as a competitive manufacturing hub, supporting not only large domestic players but also global companies considering India for supply chain diversification.

Textile and apparels

A comprehensive integrated textile programme (domestic cotton, wool, silk, and other fibres) has been launched to upgrade textile parks and provide modern machinery for clusters. Additionally, new mega textile parks are planned to create integrated hubs of spinning, weaving, and garmenting. For retailers, this means a greater supply of competitively priced local apparel and home textiles, and less reliance on imports.

MSME support: Strengthening the backbone of consumer manufacturing

The speech outlines several supportive measures for MSMEs—critical contributors to India’s retail supply chain—especially in textiles, food processing, personal care products, and light engineering goods. These include enhanced access to financing, facilitation for cluster-based development, and improved customs processes for small exporters. Faster payment cycles across government procurement and smoother compliance would reduce working-capital stress for MSMEs supplying consumer goods.

Women-led & inclusive retail: SHE-marts and assistive technology marts

The government’s introduction of SHE-marts—community-owned retail outlets for rural women empowers women entrepreneurs—formalises rural commerce, and expands product distribution into previously underserved markets. Further, under the Divyang Sahara Yojana, modern assistive technology marts will be established, enabling persons with disabilities and senior citizens to access assistive products through standardized retail formats. This shall support the emergence of new product categories within the consumer ecosystem.

Export promotion: Benefitting marine and leather

Finance minister Nirmala Sitharaman has proposed to increase the limit for duty-free imports of specified inputs used for processing seafood products from 1% to 3% of the FOB value of the previous year’s turnover. Along with this, it is also proposed to extend the time limit of export of final product from 6 months to 1 year for exporters of leather or synthetic footwear and other leather products. These reforms may provide a significant push for exports, thereby reducing the overall fiscal deficit.

Tier II & III cities: The new growth frontier

By focussing on the development of city economic regions (CERs) and upgrading infrastructure in Tier II, III cities, the Budget supports the rapid expansion of modern retail and e-commerce penetration outside metros. Rising incomes, better logistics, and inclusive retail models such as SHE-marts create strong demand centres for FMCG, apparel, electronics, and home products.

Tourism & sports: Indirect catalysts for retail demand

Investments in tourism, such as setting up a National Institute of Hospitality and developing archaeological sites, boost local retail activity and hospitality-linked consumption. Sports initiatives like Khelo India stimulate demand for sportswear, personal nutrition, equipment, and lifestyle products.

Ease of doing business: Key tax reforms unveiled

The speech reiterates simplifying compliance, digitising customs processes, and accelerating tax dispute resolution. These improvements reduce operational friction and litigation costs for manufacturers and retailers. Predictable tax environments are especially critical in consumer categories sensitive to price fluctuations.

While not directly impacting the CPR sector, the government has also introduced several tax-related updates to make compliance easier and encourage transparency such as:

• Tax deducted at source (TDS) on manpower supply services will be either 1% or 2%, depending on the nature of the transaction.

To conclude, the Union Budget 2026-27 delivers targeted manufacturing incentives, logistics advancement, and inclusive retail models while anchoring itself in a disciplined macroeconomic framework of fiscal consolidation and capital investment. With a ₹40,000 crore electronics boost, export facilitation, MSME support, and expansive Tier II, III infrastructure improvements, FY 2026-27 is poised to deepen domestic manufacturing, strengthen supply chains, and accelerate retail penetration, positioning India’s consumer products and retail sector for sustained and globally competitive growth.

(Kakkad is tax partner, consumer products and retail sector, EY. Utkarsh Mehta, director, international tax and transaction services; and Saloni Desai, manager, international tax and transaction services, EY India, also contributed to the article. Views are personal.)