Union Budget 2026–27: A Renewed Focus on Jobs, MSMEs and Labour-Intensive Growth

As India moves closer to the presentation of the Union Budget 2026–27, expectations are building around a fiscal roadmap that prioritises employment generation, export competitiveness, and support for labour-intensive industries. Against the backdrop of global economic uncertainty and evolving trade dynamics, the government appears set to balance fiscal discipline with targeted interventions aimed at sustaining growth and protecting vulnerable sectors.

Pre-budget deliberations indicate that the upcoming Budget, to be presented by Finance Minister Nirmala Sitharaman on February 1, 2026, may place strong emphasis on industries that generate large-scale employment while contributing meaningfully to India’s manufacturing and export ecosystem.

Budget 2026 may increase allocations to MSMEs | Business Today

Labour-Intensive Sectors at the Core of Budget Strategy

Labour-intensive sectors such as textiles, apparel, leather, footwear, handicrafts and gems and jewellery are expected to feature prominently in the Budget’s policy framework. These industries employ millions of workers across urban and rural India and play a critical role in absorbing the country’s expanding workforce.

With global demand facing periodic disruptions and margin pressures rising due to higher input costs, policymakers are exploring targeted fiscal and policy measures to stabilise these sectors. The objective is to protect jobs while enabling firms—particularly smaller enterprises—to remain competitive in international markets.

MSMEs as Engines of Employment and Exports

Micro, Small and Medium Enterprises (MSMEs) are central to the government’s employment-led growth vision. Accounting for a substantial share of manufacturing output and exports, MSMEs are also among the most sensitive to economic shocks, interest rate pressures and regulatory complexities.

In the run-up to the Budget, industry bodies have sought enhanced allocations for MSME-focused schemes, improved access to affordable credit, and continuity in export incentive mechanisms. There is also anticipation that budgetary support for the Ministry of MSME could be increased, reinforcing the sector’s role as a backbone of the domestic economy.

Boosting Export Competitiveness Amid Global Challenges

Export-oriented industries, especially labour-intensive ones, have faced renewed challenges due to shifting global trade policies, tariff pressures, and uncertain demand conditions in key markets. While India’s overall trade performance has remained resilient, smaller exporters continue to experience stress.

The Budget is expected to address these concerns by strengthening export support frameworks such as the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme and aligning logistics, taxation and compliance systems more closely with global standards. The recently approved Export Promotion Mission, with a significant financial outlay, further signals the government’s intent to support exporters through both financial and institutional mechanisms.

Credit Access, Technology and Long-Term Productivity

Beyond immediate fiscal relief, the Union Budget 2026–27 is also likely to focus on structural enablers of long-term growth. Improved credit guarantee coverage for MSMEs could help ease financing constraints, particularly for first-time exporters and small manufacturers.

There is growing emphasis on technology upgradation, automation and digital integration, enabling labour-intensive sectors to move up the value chain without compromising employment. Support for research and development, skilling initiatives, and digital public infrastructure is expected to complement traditional manufacturing incentives, creating a more resilient and future-ready industrial base.

Balancing Growth Priorities with Fiscal Prudence

While growth and employment remain central themes, the government is expected to maintain a cautious stance on public finances. With a projected fiscal deficit target of around 4.4 percent, the Budget may rely more on targeted incentives and reforms rather than broad-based spending increases.

This approach reflects an effort to sustain macroeconomic stability while directing limited fiscal resources toward sectors with the highest employment and multiplier impact.

The MGMM Outlook

India’s Union Budget 2026–27 is shaping up as a targeted response to employment challenges amid global economic uncertainty, with a clear emphasis on labour-intensive industries and MSMEs. Sectors such as textiles, apparel, leather, handicrafts, and gems and jewellery are expected to remain central to the government’s strategy, given their role in absorbing a large workforce and supporting exports. With rising input costs and volatile global demand affecting margins, the Budget signals a calibrated approach that combines fiscal discipline with selective interventions to stabilise jobs, sustain manufacturing momentum, and protect vulnerable segments of the economy.

MSMEs continue to anchor this employment-led growth model, with expectations of stronger credit access, continued export incentives, and higher budgetary support. Measures such as strengthening RoDTEP, improving logistics and compliance frameworks, expanding credit guarantees, and encouraging technology upgradation indicate a shift toward productivity-driven competitiveness without undermining employment. Alongside skilling, digital integration, and R&D support, the government’s approach reflects an attempt to balance near-term relief with long-term industrial resilience, while maintaining fiscal prudence and directing resources toward sectors with the highest multiplier impact.

(Sources: Business Today, Economic Times, Moneycontrol)