Experts say that this shift could significantly alter how exporters access state support in an increasingly volatile global trade environment.
The budget documents show that older interest subsidy schemes have been phased out, while funding is being redirected towards export insurance, trade enforcement and streamlined export support programmes. The move suggests that the Centre no longer sees blanket credit subsidies as the preferred tool for supporting exports, experts said.
The strongest sign of this shift is the complete withdrawal of the interest equalization scheme (IES). The scheme helped exporters manage high borrowing costs and was an important source of support for micro, small, and medium enterprises (MSMEs) and labour-intensive sectors. It had an actual outlay of ₹2,482 crore in 2024-25, but received no allocation in the FY26 budget or in FY27(budget estimate), marking a full exit from one of the government’s biggest export subsidy programmes.
“The government is enhancing trade infrastructure, reforming special economic zones (SEZs), and facilitating duty-free import of key inputs to lower export costs, especially in sectors like seafood,” said Agneshwar Sen, trade policy leader, EY India.
“Allowing DTA (domestic tariff area) sales, albeit with conditions, for SEZ units will enable them to compete with imports. Thus, while existing incentive schemes remain in place, there is a clear tilt toward export insurance, logistics reforms and manufacturing-linked support to build long-term export resilience,” Sen said. “This approach is certainly more sustainable as it aligns policy with global demand and domestic capacity building,” he added.
DTA refers to the domestic tariff area, which is the part of India and lies outside SEZs. In trade terms, when SEZ units sell goods into the DTA, such sales are treated like imports into India and attract applicable duties.
As per the budget document reviewed by Mint, the Department of Commerce has been allocated ₹5,873 crore for 2026-27 (BE), lower than the revised estimate (RE) of ₹6,606 crore in 2025-26. In contrast, the Department for Promotion of Industry and Internal Trade (DPIIT) has received a higher allocation of ₹11,970.83 crore for FY27 (BE), which is about 39% higher than the ₹8,616.15 crore allocated in FY26 (RE). This takes the total allocation for the ministry of commerce to ₹17,843.83 crore in FY27 (BE), up from ₹15,222.15 crore in FY26 (RE), an increase of about 17.2%.
However, the decision to shift away from interest subsidy schemes has not gone down well with industry leaders representing the MSME sector, for whom the scheme was a critical lifeline.
“The withdrawal of the IES significantly increases the cost of export credit for MSMEs at a time when global demand is weak, interest rates remain high, and liquidity pressures are acute,” said Vinod Kumar, president, India SME Forum.
For lakhs of small exporters, especially in labour-intensive sectors such as textiles, leather, engineering goods, handicrafts and gems and jewellery, the scheme acted as a critical cushion against rising financing costs, Kumar said.
“Its discontinuation risks eroding India’s export competitiveness, discouraging first-time exporters, and pushing many MSMEs out of global value chains,” Kumar said.
In place of such subsidies, the budget has strengthened the Export Promotion Mission, which focuses on MSMEs, allocating ₹2,300 crore for 2026-27, compared with a revised estimate of ₹2,250 crore in the previous year.
“The mission brings together earlier schemes, including the Market Access Initiative and interest equalization, into a single framework that combines access to trade finance with non-financial support such as compliance assistance, market diversification and exporter preparedness,” a government official said.
Another key aspect of the budget is its increased focus on managing global trade risks. With geopolitical tensions, sanctions and payment uncertainties rising in recent years, the government is relying more on export insurance rather than subsidies to support exporters.
“What stands out in this budget is the clear move away from open-ended export subsidies towards a system that protects exporters through insurance, trade remedies and stronger manufacturing ecosystems,” said Amit Singh, associate professor at the Special Centre for National Security Studies, Jawaharlal Nehru University.
“The emphasis is now on managing risk and enforcing trade rules, rather than subsidizing costs, which marks a structural change in how export support is being designed,” said Singh.
Alongside risk mitigation, the budget places greater emphasis on enforcement. Allocations for trade remedies and trade defence have risen to ₹23.9 crore in FY27, reinforcing the government’s growing reliance on anti-dumping, countervailing and safeguard measures to protect domestic industry and exporters as import competition intensifies.
The reorientation of export support is reinforced by the DPIIT’s allocations, which link export competitiveness more closely to manufacturing infrastructure.
DPIIT has earmarked ₹3,000 crore each for national industrial corridors and for the new plug-and-play industrial parks scheme in 2026-27. The latter had seen an allocation of ₹2,500 crore in the FY2025-26 budget, cut sharply to ₹250 crore in the revised estimates due to project readiness issues, before being scaled up significantly in the current budget.
Amardeep Singh Bhatia, secretary, DPIIT, said, “The budget continues on the path towards achieving the goal of Viksit Bharat by deepening reforms and supporting manufacturing-led growth.”
“Several schemes announced in the budget are aimed at strengthening domestic value chains across sectors and integrating them more closely with global value chains,” Bhatia said in a statement.
According to him, the measures will also help build skills aligned with the needs of a modern, technology-driven industry, improve productivity, and strengthen infrastructure.
Bhatia added that the budget includes multiple steps to attract foreign investment and facilitate exports by reducing compliance burdens, including through easier customs processes, enabling domestic manufacturers to better leverage recent free trade agreements.
Capital outlay on industries has crossed ₹5,100 crore, underscoring the push to embed export growth within large, integrated industrial ecosystems rather than through standalone trade incentives.
“The budget takes some steps in the direction of strengthening exports – like providing duty exemptions to a few capital goods, providing some clarity on taxation liabilities for component warehousing and capital goods consignment,” said Rahul Ahluwalia, founder and director at the Foundation for Economic Development (FED).
“Some incentives for specific sectors like textiles, footwear, electronics components and sporting goods will also benefit the export ecosystem,” said Ahluwalia.
“This budget reshapes India’s trade approach by shifting from passive support to active efficiency. The removal of the ₹10 lakh courier export cap, digitization of customs through the CIS platform, and the introduction of the Credit Guarantee Scheme for Exporters (CGSE) will make it easier for MSMEs to access credit,” Ravi Saxena, chief executive officer (CEO) and founder of Wonderchef, a kitchen appliances maker.
Under the CGSE, well-run MSME exporters will be able to avail collateral-free loans of up to ₹20 crore to support expansion and working capital needs, Saxena added.
