How Does India's Union Budget Apply to Your Strategic Growth Plans?

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• Investment signals strong mandate for continued growth
• Sector hotspots for MNC market entry and expansion
• Policies signal the new era of global trade
• Key takeaways

Finance Minister Nirmala Sitharaman’s delivery of India’s union budget is a clear indication of India’s commitment to continued growth and strengthened position as a global trade giant. Explore how key policies set the stage for entry, expansion, and fund flows for your business.

As India invests in its three Kartavya pillars of growth, capabilities and inclusion, both domestic and foreign businesses should be heartened by the investment-positive sentiment and policies, and excited by the opportunities they afford.
—Sunny Mann, Global Chair, Baker McKenzie

Investment signals strong mandate for continued growth

With public capex rising to INR 12.2 lakh crore for FY27, infrastructure-led growth, including the announcement of seven new high-speed rail corridors, remains top of mind. India is also set to launch Bharat-VISTAAR, an AI-backed platform which aims to boost the country’s agriculture tech offering through precision farming advisory.

Tax simplification via the new Income Tax Act will also reduce the burden of complexity for both individuals and businesses operating in India. Additionally, extension of the ITR deadline till end March 2026 also offers reduced litigation risk and a wider margin to catch inadvertent filing errors.

"India’s union budget lays out a multifaceted strategy that includes significant investment in strengthening domestic supply chain competitiveness, opening the doors to growth not only for domestic businesses but incentivizing MNCs to move into or expand within India," shares Mini Menon vandePol, Chair, Global India Practice.

"This budget strengthens India’s strategic focus as a manufacturing, R&D, and export hub, while further simplifying taxation and improving logistics. The proposed period of income-tax holiday for GIFT City units doubling from 10 years to 20 years (consecutive), will also provide greater predictability for global financial institutions for long‑horizon capital allocation decisions," vandePol notes.

Sector hotspots for MNC market entry and expansion

The Atmanirbhar Bharat vision continues to drive sector-specific incentivization through a range of policies and regulatory updates. Large incentives for electronics, biopharma, and container manufacturing and green-tech funding, aligned with global sustainability goals, will boost continued influx of foreign investment.

Direct trade measures, including duty cuts, expanded exemptions, and streamlined export processes, signal the government’s promotion of local businesses through lowering operational costs and improving access to global markets. For MNCs, the enhancements in trade facilitation and logistics make India a more attractive and efficient hub for investment and supply chain operations.

Lower barriers of entry for foreign entities, reduced customs complexity and digital single windows, and increased predictability are all positive signals for continued MNC entry and expansion in India. Explore a quick summary of key policies below.  

Policies signal the new era of global trade

With the slate of recent trade deals, including the tariff agreement with the USA (announced 2 February 2026), which is not a full FTA, the TEPA with EFTA (in force as of October 1, 2025), the trade deal with the UK, a trade deal with the EU (yet to be signed and ratified) and a trade deal strategic framework with the US (COMPACT*), India opens its market up, positioning itself as an important alternative trading and investment hub in the global supply chain.

“The significant announcement of a US-India tariff agreement resulting in reductions on both sides will be a breakthrough for domestic manufacturing,” notes Christine Streatfeild, Partner, Washington DC. The easing of import duties on crucial raw materials promotes manufacturing and increased access to export markets through these trade agreements provides the other piece of the formula. “This is momentum that global supply chain was looking for and has now been delivered,” shares Streatfeild.

Tax policies are also leaning in favor of businesses in India, including increased transfer pricing certainty through the reduction of safe harbor margins (to 15.5% eligibility threshold raised to INR 2,000) and Unilateral Advanced Pricing Mechanism (UAPA) completion time capped at two years. This move not only reduces the tax burden on corporates but also prevents the over-taxation of capital returns as well as simplifying compliances and lowers tax disputes risks. Additionally, Minimum Alternate Tax (MAT) is set to drop to 14%, which may allow businesses greater flexibility with capital management.

India's counterparts and foreign investors are calling for more ease of doing business, less technical barriers, investment protection, and favorable taxation. The recent withdrawal of Scheme X of the Bureau of Indian Standards (BIS) and the Union Budget are moves into the right direction.
—Philippe Reich, Partner, Switzerland

Key takeaways

India’s union budget is decisively pro‑industry and pro‑manufacturing and signals the country’s commitment to sustain growth, with direct implications for MNCs.

• Infrastructure and technology investments emphasize India’s commitment to overcome challenges and reduce complications of conducting business in India.
• Key sectors such as manufacturing, energy, R&D, and data/AI are hotspots for MNC investment.
• Tax and compliance policies aim to increase operational efficiency, reduce risk, and increase capital flexibility.
• Coupled with India’s bilateral and regional trade strategies, its position as a key investment destination is set to become stronger in 2026.

* US-India strategic umbrella COMPACT (Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology)

This article is being provided as general information and does not constitute legal advice. Baker McKenzie does not practice Indian law and where Indian law advice is needed, we work closely with top India-qualified lawyers. We’d be happy to discuss your needs in India. For more information, please contact Mini Menon vandePol.