The Make in India initiative was launched with a vision to position India as a global manufacturing hub by facilitating investment, encouraging innovation, and modernizing infrastructure. The success of the Phased Manufacturing Programme (‘PMP’) in India for achieving highest exports for mobile phones in 2024 which made India the 3rd largest exporter in the smartphone market, from the 23rd largest exporter in 2019, should be replicated in other sectors. Various tariff barriers, non-tariff barriers and incentives to attract investment in the manufacturing sector are being explored by the Central Government. Like the past few budgets, this time also a series of concessions have been extended by the Government in line with the ‘Atmanirbhar Bharat’ initiative. In this article, we shall discuss the key takeaways of the Union Budget 2025 in relation to the Government’s ‘Make in India’ initiative. Through the Union Budget 2025, the Government has sought to further strengthen and boost domestic manufacturing in India and promote export and employment in key sectors like textiles, shipment, toys, electronic vehicles and leather.
Impact of the ‘Make in India’ initiative
The Make in India initiative has significantly improved India’s Ease of Doing Business ranking globally, increased Foreign Direct Investment (FDI) inflows (USD 70.95 billion in FY 2023-24), strengthened the domestic production, and is exemplified by projects like INS Vikrant (the country's first domestically made aircraft carrier) and Vande Bharat trains (India’s first indigenous semi-high-speed train).
In the recent times, with the introduction of Product Linked Incentive (‘PLI’) Schemes and various other incentive schemes, the market has been able to attract investment furthering the the second wave of ease of doing business (‘EoDB 2.0’). The allocation in the 2025 Budget for PLI schemes is INR 25,000 crores which is a 108% increase, the largest allocation with a 45% increase of INR 9000 crores, is done for the Ministry of Electronics and Information Technology.
Textiles industry
The Union Budget 2025 observed a 19% higher budget allocation for the Ministry of Textiles than the last year’s allocation. India’s cotton sector is facing a significant crisis. In the FY 2024-25, an estimated decline of 29.9 million bales of cotton production was observed, which is the lowest in six years.[1] The dominance of MSMEs limits scale and efficiency, while its fragmented nature increases logistical costs. India's reliance on cotton, unlike the global shift towards MMF (Man Made Fabric), limits its competitiveness in the worldwide market.[2] This is further jeopardising the Central Government’s mission of achieving $100 billion textile exports by 2030. In furtherance to the Make in India initiative and to address the existing challenges, the Finance Minister in the Union Budget 2025 announced a five-year Cotton Mission. This mission runs on the 5F principle (‘Farm to Fibre; Fibre to Factory; Factory to Fashion; Fashion to Foreign’) as announced last year post the July 2024 Budget. This mission is expected to stabilise raw material availability, and enhance the global competitiveness of India’s textile sector, where 80% of capacity is driven by MSMEs. The Central Government strives to not only incentivise manufacturing of textile but also increase employment through the textile industry. The Samarth scheme for skill development in the textile sector for capacity building was extended till 2026 for achieving maximum employment of youth.
India’s technical textile industry was valued at $29 billion in FY 2024-25[3]. Further, the Government intends to promote the domestic production of technical textile products like agro-textiles, medical textiles, geo textiles in FY 2025-26 as well. The PLI Scheme for Textiles was launched in 2021 to promote production of MMF (‘Man Made Fabric’) Apparel, MMF Fabrics and Products of Technical Textiles in the country to enable textiles industry to achieve size and scale and to become competitive.
Technical textile products are functional textile products having specific characteristics relevant for use in different industries like automobiles, construction, medical, industrial safety etc. Several changes were made vide last year’s Budget to promote manufacture of technical textiles such as introduction of new tariff lines like carpet mats having fire resistant, chemical resistant, etc. properties, armour for ballistic protection; reduction of Basic customs duty (‘BCD’) on the import of ‘Methylene Diphenyl Di-isocyanate (MDI) for use in the manufacture of Spandex Yarn’ and extension of already existing exemption for ‘Polytetrametylene ether glycol, (PT MEG) for use in manufacture of spandex yarn’.
As a part of this transition towards modernisation, sustainability has become a top priority, and technology is playing an important role in making handloom weaving more environment friendly. Technology is also helping to lessen the environmental impact of handloom production by using natural dyes and implementing energy-efficient weaving methods. Furthermore, digital tools are being employed to improve resource management, reduce waste, and increase the craft’s overall sustainability.
Vide the Union Budget 2025, the Government has added more types of shuttle-less looms to the already existing list of fully exempted textile machinery. Further, the existing exemptions/concessional rates for textile machinery and parts thereof have also been extended till 31 March 2027.
Toys industry
To further develop a manufacturing ecosystem in the Toys Industry, the Government has inter alia, introduced mandatory quality norms (QCO), a comprehensive National Action Plan in 2020 (‘2020 Plan’) and collaborations between the Indian and global toy industries.
The 2020 Plan had outlined key action points to incentivize toy manufacturers and in turn boost both, exports and domestic sales of toys, including setting up of production clusters, investments for infrastructure and promoting R&D. Additionally, the Government notified the Toys (Quality Control) Order, 2020 to regulate safety standards and quality of toys for both domestic and imported toys. Further, the BCD on import of toys was raised from 20% to 60% in 2020 and to 70% in 2023. The export of Indian toys to countries like UAE and Australia is subject to zero duty under the recent Free Trade Agreements between the countries. Similarly, once the India-EFTA Trade and Economic Partnership Agreement is ratified, the export of toys shall also be duty free to Iceland, Norway and Switzerland.
Pursuant to these initiatives, the Indian toy industry has witnessed an exponential rise in exports and a sharp decrease in imports of toys. The Government had also envisaged a PLI scheme for toys, however, the scheme has not been crystalized and implemented yet.
The Finance Minister in her Budget speech of 2025 has announced a fresh National Action Plan for 2025-26 with an aim to make India a global hub in the industry. Further, under the 2025 Budget, parts of electronic toys have been exempted from Social Welfare Surcharge and the BCD on them is reduced from 70% to 20%. However, these imports are liable to AIDC at 7.5% if used for manufacturing of electronic toys and at 20% if used for manufacturing of other toys. Thus, evidently, the Government is incentivising domestic manufacturing of electronic toys, in particular.[4]
Shipping industry
The shipping industry in India, especially shipbuilding, has been incentivised by the Government since quite a few years. India intends to increase its share in the global shipbuilding, repair and recycling market, in line with the ‘Maritime India Vision 2030’ and ‘Atmanirbhar Bharat’.
Raw materials, parts, consumables etc. used in the manufacture of vessels have been receiving the benefit of exemption on BCD and the period for which such benefit is available has been extended from time to time.
Much to the relief of vessel manufacturers, the Government vide Union Budget 2025 has extended this benefit for another ten years. This benefit has also been extended to ships and vessels imported for breaking down. This benefit is undoubtedly only available when the end-use of the goods is in the manufacture of vessels or ship breaking.
Apart from the exemption from BCD, several other measures have been provided by the latest Budget which aim to promote the shipping industry in India. These include:
1. Revamping of the Shipbuilding Financial Assistance Policy which will focus on addressing the cost disadvantages faced by Indian shipbuilders.
2. Inclusion of large ships in the infrastructure Harmonized Master List (HML)
3. Shipbuilding Clusters for development of ecosystem and collaboration between various players of the maritime industry.
4. Establishment of Maritime Development Fund with a corpus of INR 25,000 crore to support long-term financing for the maritime industry.
5. Benefits to Ship-leasing units of global companies in the IFSC
Leather Industry
In line with the Government’s emphasis on production and employment generation, the Union Budget 2025 provided for a Focus Product Scheme which shall be announced, for the leather and footwear (both leather and non-leather) sector of India. The incentive schemes for the leather industry should be tailor made based on the success of Tamil Nadu, which is a leader in the traditional leather sector and now championing the growth of non-leather footwear, as suggested in the Economic Survey 2024-25.
Last year, the Government exempted several items like wet white, crust and finished leather, additional accessories and embellishments imported for the manufacture of leather and textile garments, footwear and other leather articles for export, from payment of BCD. Continuing the same spirit of domestic production and export promotion of leather goods, the Union Budget 2025 has exempted wet blue leather from import duty and crust leather from export duty. To incentivise domestic production in the footwear sector, the BCD on import of Footwear with outer soles of rubber, plastics, leather etc. has been reduced from 35% to 20% and these goods have been further subjected to 18.5% of AIDC.
Electric Vehicles
India strives to achieve Net Zero commitment by 2070. Pursuant to the same, the Government has announced a National Manufacturing Mission to assist clean tech manufacturing for production of PV cells, EV batteries, grid scale batteries etc. Various PLI and incentive schemes have been formulated by the Ministry of Heavy Industries to address several challenges faced in the adoption of electric mobility including the huge issue of development of charging ecosystem[5], and other measures like simplification of approval and endorsement for EC charging stations to promote electric vehicles.
The Government has also made the following policy changes to strategically boost domestic capabilities of EV production:
1. Exemption of BCD on import of Lithium-ion battery waste and scrap
2. Exemption of BCD on import of cobalt powder and waste, lead, zinc and 12 more critical minerals
3. Addition of 35 capital goods for EV battery manufacturing to the list of exempted capital goods.
Conclusion
It is observed that the policies introduced in the recent past as well as in Budget 2025 are in line with the ‘Make in India’ and ‘Aatmanirbhar Bharat’ initiatives. The Government is aiming towards a strategic shift from ‘import’ to ‘export’ of goods and services and to develop a self-reliant ecosystem. The recent reforms in the various sectors as discussed in this article, attest to the objective of making India a global leader across sectors.
[Antara Bhide and Anjali Hirawat are Associate and Partner, respectively, in Customs practice while Priyanshi Rachchh, Simran Chetwani and Aastha Sahay are Associates and Asish Philip is a Partner in Corporate and M&A practice at Lakshmikumaran & Sridharan Attorneys]
[1] Cotton Crisis: India's Textile Industry on the Brink | Textile Magazine, Textile News, Apparel News, Fashion News
[2] Economic Survey 2025 | Pg 201
[3] India’s Technical Textile Market Reaches $29 Bn In FY2024, Set To Hit $309 Bn By 2047: Report | BW BusinessWorld
[4] Agricultural Infrastructure and Development Cess (‘AIDC’) is levied under Section 124 of the Finance Act, 2021. This cess is levied on the import of goods to which it is applicable and intends to support development of agricultural infrastructure in the country.
[5] Economic Survey 2025, Pg 175
