Budget 2026: Industry calls for ‘next-gen’ reforms in manufacturing, AI, and tax certainty

The current global economic environment is marked by significant instability. While major developed economies are facing slow to sluggish growth, US tariffs continue to take a toll on international trade, particularly affecting China and India. Despite this, the Indian economy has demonstrated remarkable resilience and stability in an environment market by shifting geopolitical dynamics and global uncertainty. The World Bank projects India's growth to range between 6-6.5%, driven "largely by government's progressive economic policies."

Key government schemes such as the production linked incentive (PLI) programme have significantly increased domestic manufacturing. Meanwhile, employment linked incentives aim to expand formal employment and enhance social security coverage. Additionally, reforms such as the goods and services tax (GST) and recent tax relief measures for individuals are intended to improve consumer spending capacity and support economic momentum.

As we enter FY 2026-27, both Deloitte and the associated chambers of commerce and industry of India (ASSOCHAM), in their recent reports have said that while the government's capex push has been effective, the next phase of growth requires a pivot from basic infrastructure to 'next-gen' capabilities: high-tech manufacturing, digital sovereignty, and resolving legacy tax friction.

In this article, we will explore the pre-budget expectations made by Deloitte and ASSOCHAM demanding stability over populism—seeking tax certainty, and strategic incentives over short-term doles.

Manufacturing 2.0: beyond basic incentives

• The 15% tax regime: Both Deloitte and ASSOCHAM demanded for the revival of Section 115BAB which was introduced in 2019 to promote multi-national corporations (MNCs) to set up manufacturing plants in India, which was in line with the Viksit Bharat objective. The industry leaders have urged the government to extend the 15% concessional corporate tax rate for new manufacturing units, which expired in March 2024. Deloitte goes a step further, suggesting this benefit be extended to Global Capability Centres (GCCs) to position India as an innovation hub, not just a back-office.

• Raw material security: ASSOCHAM has requested for zero customs duty on critical inputs such as coking coal, ferro nickel, and stainless steel scrap. This is framed as essential for the competitiveness of domestic steel and alloy industries against dumping from China and Vietnam.

• Strategic sectors: Both ASSOCHAM and Deloitte have pushed for PLI-style support for emerging sectors. While the former focusses on traditional sectors like textiles, and food processing, the latter highlights the need for incentives in space technology (GST exemptions for launch vehicles), and nuclear energy startups.

Digital & AI leap: sovereignty and infrastructure

• AI infrastructure: Deloitte has urged the government to launch a national digital infrastructure mission 2030 to recast digital India "into a long-term, mission-mode programme that unifies digital investments across identity, payments, data exchange, health, skilling and commerce, with a co-funding model for states". Deloitte has also recommended the launch of a National DPI Observatory to track economic and social outcomes. "The mission should adopt the success model of Gati Shakti, integrating ministries, funding streams and performance dashboards under one institutional umbrella," Deloitte said in its report.

• Data centre incentives: The industry has demanded for infrastructure status as well as tax holidays for data centres. With the DPDP act stressing data sovereignty, both reports argue that tax breaks are vital to encourage keeping data onshore.

• Single-window digital compliance: ASSOCHAM has called for the implementation of Section 11(3) of the customs act effectively—creating a true 'single-window' where all import/export compliance is notified solely through customs to reduce border friction.

Ease of doing business

• Dispute resolution: Both ASSOCHAM and Deloitte have made recommendations on dispute resolution, and to reduce litigation. ASSOHAM has proposed a customs amnesty scheme like Sabka Vishwas for legacy disputes such as countervailing duty (CVD)/special additional duty (SAD) cases. Deloitte has stressed fast-tracking advance price agreements (APAs) to provide certainty for MNCs and reduce the transfer pricing disputes.

• TDS rationalisation: Deloitte has recommended consolidating rates into three broad slabs—0.1%, 2%, 10%—and removing TDS/TCS on transactions already covered by the GST to free up working capital.

• M&A flexibility: Industry bodies have also pushed for tax neutrality in mergers and demergers. The industry wants "fast-track demergers" (under Section 233 of the Companies Act) to be explicitly tax-exempt to encourage corporate restructuring without fear of tax notices.