The Union Budget 2026 places materials, manufacturing, and resource security at the heart of India’s next growth phase — creating new signals for the recycling and circular economy sectors. With rare earth corridors, battery manufacturing incentives, and customs duty exemptions on lithium-ion battery scrap, the policy framework points toward a more integrated approach where secondary resources and critical mineral recovery become central to industrial strategy.

Alongside this circularity signal, the Budget sharpens India’s broader technology and manufacturing roadmap, positioning AI adoption, semiconductor fabrication, and digital infrastructure as primary growth engines for the next phase of industrial expansion.

Clean energy manufacturing and critical materials get targeted support

Building on its manufacturing and resource-security focus, the Budget introduces targeted measures to strengthen clean energy and storage ecosystems. 

From the development of rare earth corridors to the extension of basic customs duty exemptions on capital goods used in manufacturing lithium-ion battery cells — now expanded to include equipment for battery energy storage systems — the Budget signals a calibrated push to reinforce domestic clean-energy manufacturing and secure critical material supply chains. These measures are expected to lower project costs, accelerate capacity creation, and support the broader energy transition and storage ecosystem. It has also announced full customs duty exemption on lithium-ion battery waste and scrap to encourage domestic recycling and secondary material recovery.

While the fiscal measures lay a strong manufacturing and technology foundation, sector observers stress that implementation depth will depend on circular economy–enabling systems.

Experts say the Budget’s digital push must now be complemented by targeted policy frameworks for EPR enforcement, waste-to-resource infrastructure, and digital traceability systems to unlock scale in the circular economy and bring greater structure to India’s largely informal recycling value chain.

Industry view: Strengthening the foundations of growth

In a blog, Tata Power states that the 2026–27 Union Budget focuses on the invisible parts of the ecosystem and strengthens them as the building blocks of India’s future economy. This move reinforces a shift to cleaner, smarter, and more resilient energy systems, with policy tailwinds helping unlock efficiencies and sustainable growth over time. The company adds that the focus has shifted toward deep manufacturing — moving from assembly to cell production and mineral security.

Extending this approach to resource sovereignty, the Budget calls for the establishment of dedicated Rare Earth Corridors in Odisha, Andhra Pradesh, Tamil Nadu, and Kerala to support the full value chain, right from mining to the manufacturing of permanent magnets, crucial for EV motors and wind turbines.

Materials and metals R&D gets a policy boost

The Budget’s emphasis on advanced materials and research-led manufacturing has also drawn support from the metals and nonferrous research ecosystem.

Reacting to the development, Anupam Agnihotri, Director of Jawaharlal Nehru Aluminium Research Development and Design Centre (JNARDDC), said, “I welcome the budget 2026–27 for its continued emphasis on R&D, manufacturing competitiveness, and sustainability. The focus on advanced materials, green technologies, and industry–academia collaboration will significantly strengthen India’s aluminium and materials ecosystem, while enabling innovation-led growth and self-reliance. Budget sends a strong signal of the government’s commitment to research-led growth, advanced manufacturing, and sustainability.”

He added that the focus on innovation, skill development, and industry–academia collaboration will accelerate technology deployment, strengthen India’s materials and nonferrous metal research ecosystem, and enhance global competitiveness.

Recyclers see opportunity in rare earth and scrap measures

Recycling and secondary metals players view the Budget as a shift in how resilience is being defined across supply chains.

In his LinkedIn post, Kamlesh Jain, Chairman and Managing Director at Jain Metal Group, wrote that the Union Budget 2026 signals an important shift in how India is thinking about materials, manufacturing, and resilience. For recyclers, this is a moment worth paying attention to.

“The announcement of Rare Earth Corridors is not only about mining. These corridors are being designed as full ecosystems covering processing, manufacturing, and downstream industries like EVs, electronics, renewable energy, and defence. All of these rely heavily on critical metals. At Jain Metal Group, we see this as a meaningful opportunity. End-of-life motors, electronics, magnets, and industrial scrap can become reliable secondary raw materials when recycling is integrated early into these ecosystems,” he said.

He further noted that the rationalisation of the TCS rate on scrap to 2 percent brings predictability, eases unintended compliance costs, and makes formal recycling channels more competitive and efficient.

“Being based in Tamil Nadu, and with one of the identified corridors located here, we see this as a chance to strengthen regional industrial ecosystems by integrating organised recycling alongside manufacturing and processing,” Jain added, noting that the measures collectively recognise recycling as a strategic contributor to India’s industrial and green growth story.

Electronics and semiconductors

The electronics and semiconductor ecosystem also receives strong policy backing.

India Cellular and Electronics Association (ICEA) said the Union Budget 2026–27 adopts a steady and largely inclusive approach, reinforcing India’s manufacturing and technology ecosystem through policy continuity, scale, and targeted reforms.

The sustained focus on electronics manufacturing, the launch of India Semiconductor Mission (ISM) 2.0, and the significant expansion of the Electronics Component Manufacturing Scheme (ECMS) reaffirm the government’s long-term commitment to building resilient domestic supply chains and strengthening India’s position in global value chains.

ICEA also welcomed the announcement of a tax holiday till 2047 for foreign companies offering global cloud services using India-based data centres, calling it a forward-looking measure that anchors global digital infrastructure in India and enhances the country’s credibility as a trusted hub for data, cloud, and AI-led services.

Additional measures — including tax exemptions for foreign capital equipment suppliers in bonded zones, a Safe Harbour framework for warehousing, customs decriminalisation, and extended advance ruling validity — are expected to improve ease of doing business and investor confidence.

At the same time, ICEA flagged unresolved issues that could affect competitiveness.

Inverted duty structures across several electronics inputs continue to impact cost competitiveness, while partial MOOWR reforms, tax-neutral VMI clarity gaps, and Permanent Establishment uncertainties remain constraints.

Commenting on the Budget, Pankaj Mohindroo, Chairman, ICEA, said, “Budget 2026–27 reinforces the government’s commitment to manufacturing-led growth, particularly in electronics and semiconductors, through continuity, scale, and targeted reforms. Measures such as the expansion of ECMS, support for ISM 2.0, and long-term incentives for cloud and data infrastructure send a strong signal of strategic intent and policy stability.

“At the same time, key structural issues, especially inverted duty structures, unfinished MOOWR reforms, and tax-related uncertainties, need timely resolution to ensure cost competitiveness and speed of execution,” Mohindroo added.

Plastics sector sees alignment with sustainability and growth

The plastics industry also views the Budget as supportive of both competitiveness and sustainability transition.

Plastindia Foundation described the Budget as balanced and forward-looking, supporting economic growth, manufacturing competitiveness, and sustainability. Its leadership said the emphasis on infrastructure, MSME support, skilling, and ease of doing business will have multiplier effects across plastics and downstream sectors.

The foundation welcomed the sustainability and circular economy alignment, noting it supports the industry’s transition toward responsible manufacturing, recycling, and resource efficiency, alongside MSME competitiveness and technology upgradation.

“The Budget’s strong emphasis on infrastructure development, manufacturing, MSME support, ease of doing business, and skilling will have a positive multiplier effect on the plastics and downstream industries, which are integral to sectors such as packaging, agriculture, healthcare, construction, and mobility.The Union Budget reflects a clear commitment to strengthening India’s manufacturing ecosystem. Measures aimed at boosting domestic production, encouraging innovation, and enhancing infrastructure will significantly benefit the plastics industry, which plays a vital role in enabling growth across multiple sectors of the economy,” said Ravish Kamath, President, PlastIndia Foundation.

“The initiatives focused on sustainability, circular economy, and waste management, noting that these align well with the plastics industry’s ongoing transition towards responsible manufacturing, recycling, and resource efficiency are welcome . The plastic  industry is committed to supporting the Government’s vision of sustainable growth and looks forward to collaborating on policies that promote circularity and environmentally responsible plastic use,” he added.

Kamath further noted that continued focus on MSMEs, access to credit, and technology upgradation will help Indian plastic processors enhance competitiveness in both domestic and global markets.

Producers also state that the Budget creates structural alignment between industrial growth and sustainability metrics.

Indroneel Goho, President and CEO of Magpet Polymers, said the Budget sends a strong directional signal for circular plastics even without explicit mention. He noted that scale manufacturing, capex expansion, and decarbonisation pressures are likely to increase the strategic value of recycled and traceable materials such as rPET.

According to Goho, circular plastics are moving beyond EPR-led compliance into a competitive lever for FMCG, beverage, and export-oriented companies. Policy conditions now increasingly favour organised, technology-driven, food-grade recycling operations, likely accelerating consolidation and investment in traceability and quality systems.

Taken together, he argued, the Budget marks a structural shift: circular materials and recycling are moving from the margins of sustainability discussions toward the centre of India’s industrial growth story — with the next phase defined by who can scale responsibly and at speed.