Union Budget 2026-27 surprises that faded amid India-US trade deal noise

Last week, the discussions on the fine print in the Union Budget 2026-27 receded to the background when the leaders of the United States and India tweeted about a trade deal that will reduce the import duty from 50 per cent to 18 per cent on Indian goods entering the US. On Saturday, our government released the text of the India-US joint statement saying that the two countries have reached a framework for an Interim Agreement regarding reciprocal and mutually beneficial trade (Interim Agreement). The details given in the joint statement are quite significant, but are, for now, not legally enforceable and so, I will confine myself to certain surprises in the Union Budget.

 

The most visible reform that affects all international travellers arriving in India and a pleasant surprise is the introduction of the Baggage Rules, 2026. The duty-free allowance for most passengers arriving by air or sea has been increased from ₹50,000 to ₹75,000. Foreign tourists have also been granted a higher exemption than earlier, while airline crew members benefit from a modest increase in their allowance. The new rules rationalise jewellery import norms by moving away from value-based limits to clear, weight-based caps. Baggage declarations can now be filed electronically in advance. The Central Board of Indirect Taxes and Customs (CBIC) has issued a very comprehensive and helpful circular explaining in detail various provisions of the new rules.

 

The units in Special Economic Zones (SEZ) had been demanding that their clearances in the domestic tariff area (DTA) should not attract full customs duty applicable for goods imported from abroad but should only require surrender of duty exemption availed on the inputs used for making the goods. They were surprised that the government ignored this demand.   Instead, the finance minister has proposed, as a special one-time measure, to facilitate sales by eligible manufacturing units in SEZ to DTA at concessional rates of duty with the quantity of such sales limited to a prescribed proportion of their exports. The Commerce Ministry is yet to issue any notifications to that effect. The allocation for 2026-27 under the Remission of Duties and Taxes on Exported Products (RoDTEP) has been reduced to ₹10,000 crore. The actual for 2024-25 was ₹18,313 crore and the budgeted and revised estimates for 2025-26 are ₹18,233 crore. Similarly, the allocation for 2026-27 under the Rebate on State and Central Taxes and Levies (RoSCTL) has been cut to ₹5,000 crore. The actual for 2024-25 was ₹8,565 crore and the budgeted estimate was ₹10710 crore and the revised estimate is ₹10010 crore. Why such drastic cuts in allocations have been made is difficult to understand. So, this too, is a surprise.

 

The fourth surprise is the allocation of ₹10000 crore for a scheme to be notified for creating a globally competitive container manufacturing ecosystem. I recall that public sector units Braithwaite & Co., and Hindustan Shipyards started making containers and gave up.  Bharat Heavy Electricals also announced plans to manufacture containers and wisely abandoned its plans.  All these attempts failed because of high steel prices in India and refusal of shipping lines to offer any long term off-take contracts.  With such experiences behind us, I wonder why the taxpayer’s money should be spent on such ventures. The issue is not whether we can make containers, but at what cost we can make them.

 

Email: tncrajagopalan@gmail.com