India is considering an overhaul of its customs duty system in the 2026-27 national budget, cutting the number of duty slabs from eight to five or six as part of a broader tariff-simplification plan, Economic Times reports. This policy move will make custom clearance processes smoother for MENA exporters as duty structures across key trade categories will become simpler.

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Reform driver: The move follows a three-four month review by the Central Board of Indirect Taxes and Customs aimed at reducing litigation – which stood at nearly 75.5k pending customs cases and INR 24 bn (USD 270 mn) in recoverable arrears – and aligning tariff structures as India negotiates new trade pacts.

Indian customs classification is notoriously litigious. High complexity in duty slabs often acts as a non-tariff barrier. A simpler duty structure could ease tariff classification and compliance challenges that exporters often face, particularly in categories — electronics, petrochemicals, gold and industrial machinery — where Gulf-based suppliers are actively involved.

Manufacturing incentives in upcoming budget

The Indian government may introduce a new incentive package of up to INR 230 bn (USD 2.6 bn) to bolster domestic manufacturing in high-end construction and auto-tech machinery, Economic Times reports, citing unnamed officials. These incentives are likely to be announced as a part of the national budget for FY 2026-27.

Subsidizing means of production, not just output: Reportedly, multiple schemes are under preparation, including a USD 1.5 bn package for construction equipment and a separate USD 800 mn program to build a resilient global value chain in automobiles.

Why it matters: Currently, nearly half of these components, including tunnel boring machines (TBM) and high-end hydraulics are imported from China, Japan, and Germany. The move, if approved, could significantly alter sourcing strategies for major infrastructure and automotive players across the MENA-India corridor. With Beijing previously weaponizing TBM exports during diplomatic tensions, India’s bid to become an alternative supply chain hub could offer MENA contractors a secondary source for the heavy machinery driving giga-scale projects.

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