Budget 2026: Labour-intensive textile sector sees almost 25% jump in funds allocation

The labour-intensive textile and apparel sector and the Micro, Small and Medium-scale Enterprises (MSMEs) that were impacted by the geo political developments during the last couple of years got a boost from the Union Budget presented on Sunday (February 1, 2026) with new schemes and higher budgetary allocations.

The textile sector will see almost 25% jump in budgetary allocation for 2026-2027 from the current financial year and the MSME sector will see doubling of budgetary allocation.

Finance Minister Nirmala Sitharaman said Central public sector enterprises (CPSEs) would establish high technology tool rooms in two locations as digitally enabled automated service bureaus that locally design, test, and manufacture high-precision components at scale and at lower cost. A scheme for enhancement of construction and infrastructure equipment would be introduced to strengthen domestic manufacturing of high-value and technologically-advanced equipment and ₹10,000 crore would be allocated during the next five years for a scheme for container manufacturing.

Budget 2026 Live

For the “labour-intensive textile sector”, the government had proposed comprehensive measures that would include a special programme to promote sports goods, a National Fibre Scheme for manmade fibres, silk, wool, etc; mega textile parks developed on challenge mode for value addition to technical textiles; a Textile Expansion and Employment Scheme to modernise traditional clusters with capital support for machinery, technology upgradation and common testing and certification centres. A National Handloom and Handicraft programme would ensure targeted support for weavers and artisans. The Mahatma Gandhi Gram Swaraj initiative would strengthen khadi, handloom and handicrafts, and the Tex-Eco Initiative would promote globally competitive and sustainable textiles and apparels, and Samarth 2.0 would upgrade the textile skilling ecosystem, the Finance Minister said.

Under rejuvenation of legacy industrial clusters, the budget had proposed a scheme to revive 200 legacy industrial clusters; create a dedicated ₹10,000-crore SME Growth Fund to create future champions and top up the Self-Reliant India Fund set up in 2021 with ₹2,000 crore to enable micro units access to risk capital.

Credit guarantee support

The TReDS would be a mandatory transaction settlement platform for all purchases from MSMEs by CPSEs, and a credit guarantee support mechanism would be introduced through CGTMSE for invoice discounting on TReDS platform; GeM would be linked with TReDS, and TReDS receivables would be introduced as asset-backed securities, helping develop a secondary market.

Ms. Sitharaman said the government would facilitate professional institutions such as ICAI, ICSI, ICMAI to design short-term, modular courses and practical tools to develop a cadre of ‘Corporate Mitras’, especially in tier-two and tier-three towns.