Union Budget 2026 may unveil targeted boosters for labour-intensive sectors

The Union Budget for FY27, to be presented on Sunday, may announce a set of targeted measures aimed at supporting labour-intensive sectors, with a particular focus on micro, small and medium enterprises (MSMEs). These sectors have been among the most impacted by recent global trade disruptions, including higher tariffs imposed by the United States.

According to sources, the Centre is deliberating a few packaged schemes and incremental announcements for MSMEs that form the backbone of labour-intensive industries. Sectors such as leather, footwear and textiles are currently under active consideration, given their high employment potential and export orientation.

While the impact of higher US tariffs on India’s overall trade balance with the US has not significantly altered headline numbers, it has raised concerns around export dependence and the mounting pressure faced by certain segments of Indian exporters. Several MSMEs in these sectors continue to struggle with squeezed margins and declining order visibility, even as broader trade figures remain stable.

Officials indicate that the government may consider enhanced allocations to existing schemes and budgets for these sectors. This push is also expected to align with the recent rollout of labour codes, which are aimed at strengthening domestic manufacturing and employment generation. Labour-intensive industries, given their direct co-dependence on job creation, are being seen as potential “champion sectors” that can anchor growth in the coming years.

The government is also considering a 5-7 per cent increase in allocations to the MSME Ministry in FY27. The ministry received an allocation of around Rs 23,000 crore in the previous Budget, which could see a further hike as part of the upcoming announcements.

In recent months, the government has rolled out several facilitative measures, including export mission initiatives, moratoriums on term loans by the Reserve Bank of India, and extensions of the Credit Line Guarantee Scheme to support exporters. However, officials acknowledge that the situation on the ground remains challenging for many MSMEs, with stress levels still elevated in certain clusters.

In the previous Budget, the Ministry of Finance had announced sector-specific measures, but the emphasis this time is expected to go beyond domestic resilience to insulating these sectors from external shocks. 

Among earlier initiatives, a Focus Product Scheme for the footwear and leather sector aimed to support design, component manufacturing and non-leather footwear production, with expectations of creating 22 lakh jobs and generating a turnover of Rs 4 lakh crore. 

Other announcements included a new scheme for the toy sector to promote cluster development and skill-building, and the establishment of a National Institute of Food Technology, Entrepreneurship and Management in Bihar to boost food processing in the eastern region.