Modi takes aim at Trump’s threats with the Union Budget to shield India

Modi takes aim at Trump’s threats with the Union Budget to shield India

Published: February 2, 2026

Source: Bloomberg

In response to growing trade tensions and threats from the Trump administration, Indian Prime Minister Narendra Modi's government has unveiled a strategic Union Budget aimed at strengthening domestic industries and reducing external vulnerabilities. The comprehensive fiscal plan introduces measures to protect India's economy while maintaining its trajectory as one of the world's fastest-growing major economies.

The budget implements several defensive mechanisms, including increased import duties on specific products and enhanced support for local manufacturing through the "Make in India" initiative. This comes as a direct response to Trump's repeated criticisms of India's trade surplus and threats of retaliatory tariffs. Notable measures include additional customs duties on electronics, automotive components, and certain agricultural products - sectors where American companies have significant interests. The government has also allocated substantial funds to boost domestic manufacturing capabilities, particularly in sectors previously dependent on imports.

A key focus of the budget is strengthening India's digital economy and reducing dependency on foreign technology companies. With increased investment in digital infrastructure and incentives for domestic tech startups, Modi's government aims to create a more self-reliant digital ecosystem. This strategy aligns with India's broader economic vision while addressing concerns about data sovereignty and security. The budget also includes provisions for upskilling programs and entrepreneurship support, designed to enhance India's competitive advantage in the global services sector.

Finance experts view these measures as a calculated response to external pressures while maintaining India's commitment to economic liberalization. The budget strikes a delicate balance between protectionist measures and continued openness to foreign investment in critical sectors. According to economic analysts, this approach could help India navigate the challenging global trade environment while maintaining its growth momentum. However, some international observers caution that excessive protectionist measures could potentially hamper India's integration into global supply chains and affect its long-term economic prospects. The success of these measures will largely depend on their implementation and the evolving dynamics of international trade relations.