
By : TEAM TOS
MUMBAI :
TheBudget 2025-26, presented by Finance Minister Nirmala Sitharaman, has laid out a transformative roadmap to strengthen India's manufacturing sector and its journey toward becoming a global manufacturing hub, with a particular focus on the automotive and electric vehicle (EV) industries. As the country continues its push towards sustainability and self-reliance, this budget introduces several measures that will significantly impact the sector’s growth trajectory.
Strengthening Domestic Manufacturing and Critical Minerals Supply
Recognizing the importance of securing raw materials for India's industrial and clean energy ambitions, the government has expanded exemptions on Basic Customs Duty (BCD) for critical minerals. Following the July 2024 Budget’s exemption for 25 minerals, the new proposal extends full BCD exemptions to cobalt powder, lithium-ion battery waste and scrap, lead, zinc, and 12 additional minerals. These measures will not only ensure a stable supply chain for domestic industries but also create employment opportunities in mining and processing sectors.
Additionally, the reduction of customs duties on lithium-ion cells and the proposed incentives for domestic battery manufacturing will help lower EV production costs. The focus on expanding charging infrastructure, with enhanced support for public-private partnerships, is another positive development that will address range anxiety and improve EV adoption rates.
Accelerating EV and Clean Tech Manufacturing
The budget places a significant emphasis on India's electric vehicle (EV) and clean energy ecosystem. To support local battery manufacturing, BCD exemptions have been extended to 35 capital goods used in EV battery production. This move is expected to reduce dependency on imports, lower production costs, and boost local capacity in lithium-ion battery manufacturing.
Furthermore, a new National Manufacturing Mission for Clean Tech has been announced, focusing on key components such as EV motors and controllers, electrolyzers for green hydrogen, solar PV cells, wind turbines, and grid-scale batteries. This initiative aims to enhance domestic production capabilities, making India a major player in clean energy technologies.
The government has reiterated its commitment to promoting clean mobility by extending incentives under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. This move is expected to accelerate EV adoption, particularly in the two-wheeler and commercial vehicle segments, which have seen increasing demand.
Incentives for the Automobile Industry
In a bid to stimulate growth in the automotive sector, the government has rationalised import duties on high-end motorcycles and cars. The customs duty on completely built-up (CBU) motorcycles above 1600cc has been reduced from 50% to 30%, while semi-knocked down (SKD) motorcycles will now be taxed at 20% instead of 25%. Similarly, CBU car above 1600cc will also see a reduction in import duty from 50% to 30%. These revisions are expected to make premium vehicles more affordable, encouraging market expansion in the luxury segment.
Recognizing the importance of research and development, the government has announced increased funding for innovation in battery technologies, hydrogen fuel cells, and advanced automotive technologies. These initiatives will help Indian companies stay competitive in a rapidly evolving global market.
GST Rationalization and Green Taxation
Industry stakeholders have long called for a reduction in GST rates on EVs and related components. While the budget did not introduce an immediate GST revision, it does signal potential discussions on tax rationalization in the near future. Additionally, the introduction of ‘green taxation’ policies, including incentives for sustainable manufacturing and carbon credits for EV makers, could further incentivize clean energy investments.
Boosting Electronics and Semiconductor Manufacturing
To further strengthen the "Make in India" initiative, the government has introduced key measures for the electronics manufacturing sector. The customs duty on Interactive Flat Panel Displays (IFPDs) has been increased from 10% to 20%, encouraging domestic production and reducing reliance on imports. The budget promotes deeper localization of components, aiming to reduce dependency on imports and enhance supply chain resilience. With India emerging as a key player in global supply chains, particularly for auto components and EV manufacturing, the emphasis on boosting domestic capabilities aligns with the broader ‘Make in India’ and ‘Atmanirbhar Bharat’ vision.
Exports and Infrastructure: The Growth Engines
The budget underscores the critical role of exports in economic expansion, introducing the Export Promotion Mission with sectoral and ministerial targets. A Digital Public Infrastructure for International Trade will be established to provide financing solutions and integrate domestic manufacturing into global supply chains.
The budget outlines significant investments in infrastructure, including better roads and logistics networks, which will benefit the auto industry by reducing supply chain bottlenecks. The expansion of multi-modal transport networks and special manufacturing zones will also create a more conducive environment for automotive exports.
For infrastructure development, the budget proposes INR 1.5 lakh crore in 50-year interest-free loans to states for capital expenditure and reform-linked incentives. Additionally, each infrastructure-related ministry will publish a three-year pipeline of Public-Private Partnership (PPP) projects, encouraging private sector participation and investment in large-scale projects.
Power Sector Reforms and Green Energy Push
To strengthen electricity distribution and transmission, the government has announced incentives for states to undertake critical power sector reforms. Additional borrowing allowances of 0.5% of GSDP (Gross State Domestic Product) will be granted to states based on their progress in improving power distribution efficiency and expanding intrastate transmission capacity. These measures are expected to reduce losses in the power sector and enhance service reliability.
Conclusion: A Budget for Growth and Transformation
Overall, theBudget 2025-26 presents a well-rounded approach to strengthening India’s automotive and EV sectors. With a focus on localization, green mobility, and manufacturing incentives, the industry is poised for significant growth. However, stakeholders will continue to monitor policy implementations and look for further support in areas such as GST rationalization and long-term financial incentives.