Budget 2027-28 May Back Local Manufacturing of 100 Import-Heavy Items
The government is considering targeted support in the Union Budget for 2027-28 to raise domestic production and cut imports of about 100 critical products.
These include capital goods (machines used to make other goods) and intermediate components in sectors such as chemicals, auto parts, defence and aerospace, electronics and construction equipment.
The Department for Promotion of Industry and Internal Trade (DPIIT) finished a joint exercise with line ministries and industry to identify high-import items that India does not make, or makes too little of. It is expected to send its proposal to the Finance Ministry, which will take the final call.
Six sector-wise working groups picked the items. They covered: pharma, biotech and medical devices; chemicals, petrochemicals, textiles and footwear; capital goods, automobiles and electric vehicles; energy; construction equipment and infrastructure; and defence and aerospace (only items with civilian use) and electronics.
Possible support includes capital-linked incentives, temporary tariff protection, R&D funding, help with testing and certification, and better supply-chain credit.
The push follows China's new export licensing rules on tunnel boring machines (used for metro, rail and road tunnels), effective from November 2026. India's imports rose 7.5% to US$775 billion in 2025-26.
Import Substitution Industrialisation (ISI)
Import Substitution Industrialisation (ISI) is a development strategy in which a country tries to make at home the goods it used to import. The government shields new local industries from foreign competition with high tariffs, import limits and subsidies, so they get time to grow. India followed this path strongly from the 1950s to 1991, and many Latin American countries also used it. Today's "self-reliance" policies borrow some of its ideas, but try to combine them with exports and global competition.
The 100-item plan is a targeted form of import substitution. Its stated aim is not only to replace imports but also to make India a global supplier of these items, which is meant to avoid the weak-export trap of the pre-1991 ISI years.
Capital Goods Sector and India's Industrial Policy
Capital goods are the machines a country uses to make other things: machine tools, earth-moving and construction machines, textile machines, heavy electrical equipment and tunnel boring machines. A strong capital goods sector is called the "mother of all industries", because every factory, road and metro line depends on it. India still imports a large share of its advanced machinery, which makes it costly and exposes it to supply shocks.
Capital goods and components are at the centre of the 100-item list. China's new licensing rules on tunnel boring machines show why depending on one country for key machinery can slow down India's infrastructure projects.
Economic Coercion as a Foreign Policy Tool
Economic coercion means one country using trade, investment or money as a weapon to force another country to change its behaviour. Common tools include export bans or licences on goods the other country badly needs, sudden import bans, and investment curbs. It works best when the target country depends heavily on one supplier. The defence against it is diversifying suppliers and building local capacity.
The DPIIT exercise is partly a response to this risk. By building local production of critical items, India hopes to save foreign exchange and make sure no country can use supply of these goods as leverage against it.
- Items identified for localisation: about 100 critical import-heavy products
- Process: DPIIT with line ministries and industry; 6 sector-wise working groups; final decision with the Finance Ministry
- Target Budget: Union Budget 2027-28 (FY28)
- Possible tools: capital-linked incentives, temporary tariff protection, R&D funding, testing and certification support, supply-chain credit
- India's imports in 2025-26: US$775 billion, up 7.5%
- China's tunnel boring machine export licensing: announced 19 October 2026, effective 18 November 2026
- National Capital Goods Policy, 2016: target of ₹7.5 lakh crore production and 20% share in manufacturing by 2025
- India's ISI era: Second Five Year Plan (1956–61), Industrial Policy Resolution 1956; ended with the 1991 reforms