Budget 2026: Govt may roll out Rs 23,000 crore incentives for capital goods manufacturing

The government may unveil incentive packages worth up to Rs 23,000 crore in the upcoming budget to boost local manufacturing of high-value capital goods and reduce dependence on imports, according to a report. 

As per a report in The Economic Times, schemes are being prepared and could be announced in the Budget 2026.

The proposed incentives include a Rs 14,000-16,000 crore programme for the construction equipment sector and a Rs 7,000 crore scheme aimed at developing resilient global value chains for the automobile industry, the report added. These measures are intended to build on existing efforts to strengthen the domestic capital goods sector and lower import reliance.

The construction equipment package will focus on indigenising high-end machinery such as tunnel boring machines and cranes to cut down imports. Currently, nearly half of the sector's components by value are sourced from countries like China, Japan, South Korea, and Germany.

Restrictions on tunnel boring machine exports by China had impacted major infrastructure projects in India. Although these curbs were lifted after diplomatic talks, the government is now emphasising local production of critical components including hydraulics, undercarriages, electronic control units, sensors, and telematics.

The scheme aims to reduce imports of high-tonnage and fully built machinery. The official added that the new programmes would build on the progress made by ongoing incentive measures.

The global value chain scheme for the automobile sector will support local production of advanced driver assistance systems, 360-degree cameras, and sensors. It will promote manufacturing with at least 50% domestic value addition of these specialised automotive parts, potentially opening export opportunities.

Subsidies for procuring capital goods such as moulds and power tools, essential for making auto components, are expected to be included, the report added. The plan also envisions setting up prototyping centres to provide shared technology and testing infrastructure, fostering industry partnerships to strengthen supply chain resilience.