India Lowers Import Barriers Where It Matters Most

Rather than headline-grabbing tariff cuts, the Union Budget 2026–27 focuses on lowering costs for strategic manufacturing, clean energy, defence, health care, and exports—while selectively raising tariffs to protect a few consumer goods.

Here are the key changes:

1-Removal of Basic Customs duties

Budget 2026–27 removes basic customs duty on a range of capital goods and strategic inputs.

Nuclear power receives rare long-term support. Duties are eliminated on nuclear-generation equipment, absorber rods, and project imports for all nuclear plants registered with customs authorities through September 2035, providing certainty for large, long-gestation projects.

Aircraft sector is another focus. Customs duties are removed on raw materials for manufacture of parts of aircraft for maintenance, repair, or overhauling of aircraft or components or parts of aircraft, including engines, when imported by Public Sector Units under the Ministry of Defence.

Clean-energy manufacturing benefits, with duties removed on sodium antimonate used in solar glass and on capital goods needed to make lithium-ion cells for battery energy storage systems. The aim is to build more of the clean-energy supply chain within India.

In critical minerals, customs duty on monazite is cut to zero.

In electronics, inputs for microwave ovens and video-game consoles are exempted, encouraging deeper domestic value addition.

Health care also benefits. Duties are cut to zero on 17 additional drugs and medicines and on imports linked to seven rare diseases.

Medical-device makers gain duty-free access to X-ray tubes and flat-panel detectors used in diagnostic equipment.

2-Tariff Increase

The basic customs duty on potassium hydroxide has been raised from nil to 7.5%, increasing input costs for industries such as chemicals, soaps, detergents, and batteries unless domestic supply expands.

The duty on umbrellas (other than garden umbrellas) has been revised from a flat 20% to 20% or ₹60 per piece, whichever is higher, strengthening protection for domestic manufacturers by curbing low-priced imports.

At the same time, duties on umbrella parts, trimmings, and accessories (HS 6601–6602) have been raised from 11% to 20% or ₹25 per kg, whichever is higher, which raises costs for domestic assemblers using imported inputs and partly offsets the protection given to finished umbrellas.

3-Castor Oil SEZ Relief for Domestic Sales

Castor oil cake and castor de-oiled cake manufactured from indigenous inputs in special economic zones and sold into the domestic tariff area will attract either exemption or concessional duty. The change is meant to prevent waste of SEZ produced output during current global demand disruptions and allows SEZ units to supply the home market without losing cost competitiveness.

4-Duty Free imports of inputs for Exports

The Budget raises the duty-free import limit for inputs used in seafood processing from 1% to 3% of export value, lowering costs.

The scope of duty-free inputs in footwear manufacturing is also expanded to include shoe uppers, not just finished footwear, easing input constraints for exporters.

For garments, leather apparel, and leather or synthetic footwear, the export obligation period is extended from six months to twelve months under Advance Authorisation Scheme. This gives exporters more time to ship orders, reduces working-capital stress, and lowers the risk of penalties.

5-Courier exports limit of Rs 10 Lakh removed

The Budget removes the ₹10 lakh per-consignment limit on courier exports, allowing MSMEs, artisans, and e-commerce sellers to ship higher-value goods through courier mode without shifting to slower and more complex air-cargo or containerised procedures.

6- Budget tariff cuts may aid US exports to India

India’s Union Budget 2026–27, though country-neutral improves market access prospects for U.S. exporters across several high-value sectors. In civil and defence aviation, India has eliminated duties on aircraft components and MRO inputs, directly benefiting U.S. aerospace firms and engine and maintenance suppliers. In nuclear energy, zero customs duty on nuclear-generation equipment, absorber rods, and project imports for all registered nuclear plants until 2035 provides rare long-term certainty for U.S. nuclear equipment makers and technology providers.

The Budget also lowers barriers for US exports in clean energy, critical minerals, electronics, and health care. Duty-free imports of capital goods for lithium-ion cell manufacturing and of sodium antimonate used in solar glass reduce costs for U.S. suppliers of advanced machinery and materials.

In health care, zero duty on additional drugs, rare-disease medicines, and key medical-device components such as X-ray tubes and flat-panel detectors eases access for U.S. pharmaceutical and med-tech exporters.

Taken together, these changes quietly help U.S. in capital-intensive, technology-led exports to India.

Highlights: 

• India removes customs duties on key capital goods and strategic inputs.
• Nuclear power projects gain rare long-term certainty with duty-free imports guaranteed until 2035.
• Defence and civil aviation benefit from duty-free raw materials and MRO inputs for aircraft and engines.
• Health care sees zero duty on 17 additional drugs, rare-disease treatments, and key diagnostic components.
• Selective protection returns with higher duties on umbrellas, while raising costs for imported umbrella parts.
• Export competitiveness improves as duty-free input limits rise for seafood and timelines ease for garments and footwear.
• Removing the ₹10-lakh courier export cap opens global markets for MSMEs, artisans, and e-commerce sellers.
• The Budget’s tariff exemptions align with US strengths in aerospace, nuclear technology, clean energy equipment, electronics, and medical devices—quietly improving market access for US firms to India.