Budget 2026-27: Key challenges and growth drivers in manufacturing sector

Rising costs, AI-led disruption and skill gaps challenge manufacturers, prompting industry calls for labour code rollout, digital skilling and stronger logistics support

Key challenges and growth drivers

• Managing operational costs effectively to bolster profitability and enable competitive pricing 
• Investment in R&D critical to innovation, enabling manufacturers to develop new products and improve existing ones to meet changing consumer needs
• Shop floor productivity enhancement by reducing wastage, machine downtime, rework/rejects, maintenance overheads
• Improving ability to absorb disruptive shocks in the entire supply chain
• Information technology-operational technology security along with proactive threat detection, response and cyber resilience
• Upskilling of workforce for improving innovation, quality and process excellence
• Disruption of existing business models through ‘product as a service’ (for example: tyre as a service, subscription-based ownership for cars, etc)

Industry ask

• Time-bound and uniform operationalisation of the four Labour Codes
• Skilling in the age of AI, automation and digital manufacturing
• Focus on AI-enabled shopfloor skills at a national level
• Credit enhancement for export-oriented and first-of-a-kind technologies
• Ensure robust last-mile connectivity via road, rail & multimodal logistics
• Initiatives aimed at creating and advancing homegrown manufacturing capabilities and process technologies
• Industry-academia collaboration focused on applied manufacturing research