Union Budget 2026-27: Driving India's EV Revolution Forward

The upcoming Union Budget aims to enhance electric vehicle adoption through fiscal incentives, boosting domestic manufacturing, and reducing reliance on imports. Proposed measures include recalibrating the PLI scheme, offering tax incentives, and easing customs procedures to promote affordability and sustainability in India's EV sector.

The Union Budget for 2026-27 is set to unveil a range of initiatives designed to accelerate the adoption of electric vehicles (EVs) within the country, according to Sheena Sareen, a Partner at Deloitte India.

Speaking to ANI, Sareen highlighted the potential for the government to announce measures aimed at boosting domestic manufacturing, strengthening support for clean mobility, and encouraging investments across the EV value chain. Among the proposals likely to be explored are adjustments to the Production-Linked Incentive (PLI) scheme, targeted tax incentives for R&D, and capital goods manufacturing to enhance scale and competitiveness.

Scheduled for presentation in Parliament on February 1, 2026, Deloitte India's analysis underscores how such initiatives could reduce reliance on imported technologies, support indigenization, and help in curbing crude oil imports, balancing foreign exchange reserves. The recalibration of the PLI scheme could lower thresholds for domestic value addition and relax investment requirements, making incentives accessible to a broader spectrum of EV startups and component suppliers.

Further, the budget may introduce a capital goods incentive scheme specifying thresholds for domestic manufacturing, currently dependent on imports, that could fortify the entire EV value chain. In terms of indirect taxation, Sareen observed limited scope for GST rate rationalization, given recent reforms. However, addressing the inverted duty structure is crucial, as it impacts overall vehicle and EV costs. Sareen also pointed out that simplifying customs procedures, especially those relating to the Special Valuation Branch (SVB), can enhance supply chain efficiency and cost predictability for EV manufacturers.

On sustainability, Sareen cited Corporate Average Fuel Efficiency (CAFE) norms as a major driver of cleaner mobility in India, with the potential evolution of carbon taxes further incentivizing electrification. She forecasts that a strategic mix of EV-centered incentives, tax relief, and regulatory clarity in the forthcoming budget could not only align with India's clean energy targets but also diminish the country's fossil fuel reliance and fortify its fiscal health.