Budget 2025-26 has emphasized on the backward integration of India’s electronic goods value chains and other capital-guds industries, decreasing basic customs duty on components. The proposals have a decrease in duty on open cells for television panels ranges from 10% -15% to 5% and 2.5% to 0% in parts of open cells. Most of these panels, which are 60–65% of the cost of TV, are currently imported. To encourage rapid adoption, the import duty on performance panels has been increased from 10% to 20%.
To promote mobile phones and electric vehicles, duties have been removed on parts used in the price of chain, printed circuit boards, camera modules and various other components of mobile phones. The Finance Minister said in his budget speech, “For the list of exempted capital goods, I propose to add 35 additional capital items for EV battery manufacture, and 28 additional capital goods for mobile phone battery manufacture,” Finance The minister said in his budget speech.
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These initiatives follow the construction of a mobile phone manufacturing ecosystem in the country through the production linked incentives (PLI) schemes, and emphasizes backward integration in the early component construction, which was limited to the final product assembly.
However, the absence of an announcement on the much awaited PLI scheme for components disappointed the industry.
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The budget also includes some measures to improve the ease of doing business in the area. Non-residents providing services to a resident company who are set up or run an electronics manufacturing unit in India will be covered by a prescribed taxation regime, which can reduce compliance burden and tax uncertainty.
Nuclear power
Other important declaration for the Capital-Guds industry was emphasized on building nuclear power capacity 20,000 crores for research and development of small modular reactors (SMR). The government has a plan of at least five indigenously developed SMR with the help of a private sector, for which the Atomic Energy Act will be amended. The move can lead to significant benefits to companies such as Larsen and Toubro Limited, who already have significant expertise in this place.
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Despite various announcements that can benefit the region, the BSE Capital Goods index fell more than 3% on Saturday. The most difficult hits had Rail Vikas Nigam Limited (9%below), while Titgarh Rail System Limited, ABB Limited, Siemens Limited and Hindustan Aeronautics Limited fell 4-6%.
It seems that the industry has been left by the government’s capital expenditure budget 11.2 trillion, which is almost the same as FY 25. FY25 has a revised estimate for government capex 10.2 trillion, 8% less than budget estimates 11.1 trillion is expected to be a push in the last two months of the financial year.
