-By Jaya Pathak
India is going into Budget 2026-27 with a new limitation: the export growth is no longer possible to be planned in the scale of the constant rise of access to the market. The exporters have now requested the budget which hypothetically presupposes the frequent unexpected tariff shocks, unexpected compliance requirements, and increased freights volatility- and nevertheless enables it to keep the Indian products competitive.
The presentation of the union budget 2026-27 by the finance minister Nirmala Sitharaman will be held on the 1st of February. During that run-up, the exporters and the industry associations have lobbied openly in the form of a package of tax incentives, rationalisation of import duties, swifter refunds, and reduced export credit-measures aimed at maintaining current margins in the event of a sudden increase in overseas tariffs.
The real meaning of tariff-proofing:
Tariff-proofing does not consist of retaliating, or out-subsidising their competitors. It is a less noisy art: reducing the cost of India to such an extent that as a destination market increases duties, the exporter still has space to compete with it- through relief to input cost, financing, logistics speed and product upgrading.
This has become urgent as a topic of debate in the industry, evidenced by recent commentary on the subject that is highlighted by heightened global protectionism, regular increases in tariffs and non-tariff barriers that add to the uncertainty of exporters. Another issue that has been reported by PTI is that the US had placed a 50 percent tariff on Indian products entering American markets since August, interrupting shipments to the largest Indian export destination. In situations where such large shocks become realistic, the export strategy needs to depend not solely on demand predictions, it should be designed to resist.
The most important levers of the Budget:
1) Reverse engineer inverted duty structures- Since export competitiveness begins with inputs.
The exporters have called upon the government to correct the inverted form of custom duty structure where the duty on raw material, components or intermediates is a lot more than the duty imposed on finished products. The examples by FIEO speak volumes of their own: artificial yarns and fibres have to incur increased duties as compared to finished fabrics and garments, which negatively affects the value chain in the textile and apparel sector. This issue is also reflected in electronics, with a tax on parts (like printed circuit boards, connectors, and sub-assemblies) increasing relative to imported electronic finished goods- unattractive to domestic value addition.
The raising of tariff as an act of self-imposed weakness is not merely such a technical anomaly, it is a tariff-shock world. Additionally, should the state wish the firms to ascend along the value chain, it cannot keep on making high-value addition structurally more costly than importing the end product.
2) Financing should be a strategy tool and, in particular, that of MSME exporters. The submissions by Deloitte India as reported have encouraged the need to focus on export credit financing and concessional funding to the MSMEs. This is no sadistic, support MSMEs tug of war, it is a competitiveness tug of war. Whenever tariffs are increased, the working-capital pressure increases instantly–since the price of the exporter to sell is limited and the input prices, freighter, and compliance expenses are not waiting kindly to be satisfied.
3) Minimize logistics vulnerability– since tariffs are not the only external shock.
According to the arguments that have been put across by FIEO, the high reliance on foreign shipping lines subjects exporters to high freight rates, disruptions in the supply system, and unpredictability of international shipping rates. Policy and fiscal assistance to develop global-sized shipping lines in India has been demanded by the exporters along with the long-term finance and viability gap funds. This falls within the definition of tariff-proofing since a tariff shock, and a freight spike tend to strike simultaneous; the exporter gets both of them as compression of margins.
4) Maintain tax policy according to manufacturing cycle investments – FIEO has suggested that the concessional rate of corporate tax of 15 percent on new domestic manufacturing units in the country should be extended at least five years. Whether or not the government follows this particular request, the reasoning makes sense: quality systems, tooling and compliance are tariff-proofed only through long horizon capital, something not funded with a high state of comfort even by the firm that lives quarter to quarter.
5) Stockpile and invest export remittances – Thereafter, carry out refunds in a non-sensational manner. A seafood exporter mentioned in PTI recommended rationalisation of the rates of RoDTEP and timely refund of taxes. Export remissions are often used as a concession on the budgetary season, although in reality, they act as a cash flow stabilizer – particularly when market conditions outside the country are more unpredictable.
Sector level pressure that cannot be overlooked by the Budget
A number of labour-intensive industries are actually in need of shock absorbers rather than handouts. An example is the Apparel Export Promotion Council (AEPC), which requested fiscal concessions, interest subsidy of loans, GST cut in the machinery used in textile production, and a technology upgrading initiative to micro units, not without explicitly connecting its demand to the textile shock in the US and indeed the wider geopolitical shock. Reinstatement of base customs duty exemption on the importation of bovine crust and finished leathers and the amendment of IGCR scheme was demanded by the Council of Leather Exports.
Such information is important as it shows the locations where tariff shocks will be most affected: those industries with slender margins, high working-capital requirements, and highly global compliance costs. However, in the event that something along the lines of Budget 2026 seeks to tariff-proof exports, then it will require differentiated results, with one of them focused on the cost of inputs, another on the cost of credit, and another on logistics and capability construction.
Macro-wise, PTI wrote that the merchandise exports of India in April-December FY2025-26 increased 2.44 percent to USD 330.29 billion and imports by 5.9 percent to USD 578.61 billion thus causing USD 248.32 billion balance of payment deficit in the three-month period. These are the numbers that put into perspective the constraint, India is not attempting to defend a surplus; it is attempting to sell more exports in a world where more actively attempts to retard them.
A more literal interpretation of tariff-proofing would be: develop negotiating strength.
The allurement is to consider tariffs as a foreign-policy issue. Budgets, however, have an impact on power to negotiate as well. A country enters a trade negotiation with bargains when there is competitive manufacturing of products domestically and diversified supply chains. The Budget Survey as mentioned in Economic Times was an indication of probable dependency on the specific fiscal actions including increased PLI plans, rationalisation of customs duties on major inputs, and critical minerals and green value chains programmes. Those, in addition, are industrial-policy themes, though they are also bargaining chips, as they diminish the dependence on imports and ensure that export supply is more predictable.
This is also the reason why quality, standards and value addition continue to reappear in the tariff-proof debates: as the percentage of value content and compliance posture increase, the less exposed is the exporter to abrupt non-tariff barriers acting like tariffs in practice.
Even the government itself has been publicly bringing into focus the export strength in the face of tariff pressure. During Davos, Ashwini Vaishnaw emphasized the fact that exports have not slowed because of pressure on protectionism and that electronics have become the third-largest export sector in India. The remainder of the statement is a reminder that tariff-proofing does not only act as a defense mechanism; it also is a means of speeding up the areas where this scale already is being developed in India.
FAQs:
1) Route Has Budget 2026-27 been announced?
No; the Finance Minister will table the Budget on 2026-27 on Feb 1, reported PTI.
2) What is the essence, as budget-side, of tariff-proofing exports?
They are asking to be cut back on input prices, ease working-capital strain and tighten their logistics and financing in order to make exporters stay competitive despite tariff hikes and other non-tariff restrictions.
3) Does the concept of the exporters table to talk of inverted duty structures?
Since industry lobbying organizations say that increased import taxes on primary inputs at a greater premium over finished products increase the costs of production and dis-incentivize local value addition of products in industries such as textiles, electronics, chemicals/plastics, and leather/footwear.
4) Who have the exporters requested in the Budget 2026?
Tax incentives, rationalisation of imports duty, subsidisation of branding/marketing, creation of shipping lines of an international scale, long-term financing, and viability gap funding are some of the top requests listed in PTI reporting.
5) What is the trade environment in entering into this budget?
PTI recorded exports and imports of USD 330.29 billion (up 2.44) and USD 578.61 billion (up 5.9) respectively of merchandise and imports leading to a USD 248.32 billion trade deficit in the nine-month period.
