Union Budget 2025-26: A Transformational Push For Textiles, MSMEs, Agriculture And Exports

Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26, introducing a series of bold reforms and sector-specific initiatives aimed at bolstering India’s textile industry, MSMEs, exports and agriculture, while implementing tax relief measures to increase disposable income and stimulate economic growth.

With a strong focus on self-reliance, domestic manufacturing and export promotion, the budget aligns with the government’s vision for Viksit Bharat 2047, laying the groundwork for long-term economic expansion and global competitiveness.

Textile Industry Gets a Major Boost
Recognizing the strategic importance of the textile sector, which contributes nearly 2.5% to India’s GDP and provides employment to over 45 million people, the government has rolled out several key initiatives.

A five-year mission to enhance cotton productivity has been launched with a strong emphasis on extra-long staple (ELS) cotton. India currently imports over 50% of its ELS cotton requirements, which significantly impacts the cost competitiveness of domestic textile manufacturers. This initiative aims to:

• Reduce import dependency by promoting ELS cotton cultivation in suitable agro-climatic zones.
• Introduce advanced farming techniques, hybrid seed varieties and precision agriculture practices to boost yields.
• Support farmers with subsidies, training programmes and access to high-quality inputs.

This mission aligns with the 5F vision (Farm to Fibre to Factory to Fashion to Foreign) and is expected to improve raw material quality, enhance global competitiveness and support textile exports.

In a push for modernization and technology upgradation, the government has also introduced customs duty exemptions for two categories of shuttle-less looms, making it easier for textile mills to invest in state-of-the-art machinery. This move is expected to increase efficiency, improve fabric quality and enhance India’s ability to compete with technologically advanced textile producing nations like China and Turkey.

However, to protect domestic manufacturers from rising imports, the customs duty on knitted fabrics has been increased to 20% or Rs 115 per kg, whichever is higher. This aims to support Indian textile mills and prevent dumping of low-cost imports, particularly from China and Bangladesh.

Additionally, in a move that benefits the leather and handicrafts sector, the customs duty on wet blue leather has been reduced from 10% to nil, facilitating cost-effective raw material procurement for domestic manufacturers.

Increased Budget Allocation for Ministry of Textiles for FY2024-25
The Indian government has significantly increased the budget allocation for the Ministry of Textiles for the financial year 2025-26, highlighting its commitment to enhancing the sector’s growth and global competitiveness. The total budget allocation for the ministry has been raised from Rs 3342crore in the revised 2024-25 budget to Rs 5272 crore in the 2025-26 budget.                                                                                                                           

Strengthening Agriculture & Rural Economy
To enhance rural incomes and improve farm productivity, the budget has introduced the Prime Minister Dhan-Dhaanya Krishi Yojana, which focuses on:

• Crop diversification to reduce over-reliance on water-intensive crops like rice and sugarcane.
• Expansion of micro-irrigation projects to improve water-use efficiency.
• Post-harvest storage and logistics infrastructure in 100 underperforming agricultural districts.

The Kisan Credit Card (KCC) loan limit has been increased from Rs 3 lakh to Rs 5 lakh, benefiting 7.7 crore farmers, dairy producers and fishermen by improving access to affordable credit. This move is expected to reduce the dependence on informal lending channels and promote greater financial inclusion in rural areas.

Additionally, the establishment of a new urea plant in Assam is expected to boost fertilizer production and reduce reliance on imports, ensuring stable input costs for farmers.

MSME Sector Reforms: Expanding Opportunities for Small Businesses
MSMEs, often referred to as the backbone of the Indian economy, account for 30% of GDP and nearly 50% of exports. To strengthen and scale up MSMEs, the budget has introduced:

• Revised MSME classification norms, raising investment and turnover thresholds, allowing businesses to grow without losing policy benefits.
• Enhanced credit guarantee cover, unlocking an additional Rs 1.5 lakh crore in credit availability over the next five years.
• A new Micro Enterprise Credit Card (MECC), offering collateral-free loans up to Rs 5 lakh for small businesses, targeting 10 lakh enterprises in the first year.
• Tax incentives and compliance simplifications to reduce administrative burdens on small enterprises.

The expansion of the PLI (Production-Linked Incentive) scheme to include labour-intensive MSME-driven sectors such as textiles, leather, handicrafts and home furnishings has also been proposed. This is expected to encourage investment, boost employment and enhance India’s manufacturing base.

Export Growth & Global Trade Competitiveness
In a strategic move to expand India’s footprint in global trade, the Export Promotion Mission has been introduced to:

• Set sectoral export targets with a focus on high-value and high-growth segments.
• Ease trade barriers by streamlining regulatory approvals and documentation.
• Strengthen trade diplomacy efforts to secure favourable market access for Indian exporters.

A major highlight is the launch of BharatTradeNet (BTN)—a national digital public infrastructure for trade documentation and financing. This platform aims to:

• Simplify and digitize cross-border transactions, reducing costs and processing times.
• Provide exporters with seamless access to trade credit and insurance solutions.
• Improve supply chain transparency and efficiency.

Additionally, the government has extended the export time period for handicrafts from six months to one year, allowing artisans and manufacturers greater flexibility in managing international orders. The duty-free import of nine additional items used in the handicraft industry has also been permitted to enhance product quality and global competitiveness.

Manufacturing, Skilling & Industry 4.0
To drive domestic manufacturing and global supply chain integration, the National Manufacturing Mission will provide:

• Targeted policy support for key industries, including textiles, electronics and automotive.
• Incentives for adopting Industry 4.0 technologies, such as automation, AI-driven quality control and sustainable manufacturing.
• The establishment of five new skilling centres in collaboration with global institutions to equip workers with next-generation skills.

Taxation Reforms: Relief for Salaried Individuals & Businesses
The budget introduces significant revisions in personal income tax, aimed at boosting disposable income and consumption

• The tax-free income threshold has been raised to Rs 12 lakh, providing relief to middle-class earners.
• The standard deduction for salaried individuals has been increased to Rs 75,000, reducing taxable income.
• Corporate tax simplifications and new safe harbour rules have been implemented to reduce litigation and improve ease of doing business.

With a clear focus on strengthening domestic industries, promoting self-reliance and driving export-led growth, the Union Budget 2025-26 reinforces India’s economic vision under Viksit Bharat 2047.

By supporting textiles, MSMEs and agriculture, while implementing bold tax and trade policy reforms, the budget lays the foundation for sustainable economic growth, employment generation and global competitiveness.

Industry leaders have welcomed the measures, citing them as critical enablers for industrial modernization, financial inclusion and international trade expansion, positioning India as a key global manufacturing and export hub in the coming decades.