Budget 2026: Aviation industry gets wings with duty-free manufacturing push

Finance Minister Nirmala Sitharaman on Sunday announced a series of customs duty exemptions aimed at boosting domestic manufacturing in the civil and defence aviation sectors, as part of the Union Budget 2026 proposals.

Presenting the Budget in Parliament, Sitharaman said the government will exempt basic customs duty on components and parts required for the manufacture of civilian training aircraft and other civilian aircraft. The move is intended to strengthen India’s aviation manufacturing ecosystem and reduce dependence on imports.

In a parallel measure for the defence sector, the Finance Minister proposed to exempt basic customs duty on raw materials imported for the manufacture of aircraft parts used in maintenance, repair and overhaul (MRO) as well as other operational requirements by defence units.

Sitharaman said the measures are aimed at encouraging domestic production, improving cost competitiveness and supporting the growth of India’s aerospace and defence manufacturing base.

“The Union Budget for FY26–27 presents a forward-looking framework to comprehensively accelerate tourism and mobility across the country. With travel demand increasingly driven by Tier 2 and Tier 3 cities along with the metros, the focus on strengthening last-mile connectivity and infrastructure is encouraging for the travel industry," said Vinay Dube, Founder and CEO at Akasa Air.

The duty exemptions form part of the government’s broader push to scale up manufacturing in strategic sectors, deepen localisation and position India as a global hub for aircraft manufacturing and maintenance services.