Budget Doubles Electronics Incentives, Deepens Chip Push

India will nearly double funding for its electronics component incentive program and widen its semiconductor strategy to deepen domestic supply chains and reduce import dependence, Finance Minister Nirmala Sitharaman said in the Union Budget for 2026–27.

Sitharaman told Parliament that the Electronics Components Manufacturing Scheme (ECMS), notified on 8 April 2025 with an outlay of ₹22,919 crore, has already drawn investment commitments “at double the target,” and the government will raise the outlay to ₹40,000 crore.

“We propose to increase the outlay to ₹40,000 crore to capitalize on the momentum,” she said in the speech.

Alongside the ECMS expansion, Sitharaman announced India Semiconductor Mission 2.0 (ISM 2.0), a new phase of the government’s chip program focused on producing semiconductor equipment and materials in India, developing “full stack” Indian intellectual property (IP), and strengthening supply chains. The budget provides ₹1,000 crore for ISM 2.0 in fiscal year (FY) 2026–27.

The ECMS was approved by the Union cabinet on 1 May 2025 and targeted ₹59,350 crore in investment.

Approvals have since ramped up. The Ministry of Electronics and Information Technology said on 2 January 2026 that it had cleared 46 applications across 11 states, representing ₹54,567 crore of total investment and expected to generate about 51,000 direct jobs.

Industry groups welcomed the expanded funding and the semiconductor pivot.

Pankaj Mohindroo, chairman of electronics manufacturing lobby India Cellular and Electronics Association, said Budget 2026–27 “reinforces the government’s commitment to manufacturing-led growth, particularly in electronics and semiconductors, through continuity, scale, and targeted reforms,” citing ECMS expansion, ISM 2.0 support, and long-term incentives for cloud and data infrastructure.

Mohindroo also flagged unresolved issues including inverted duty structures and pending reforms under MOOWR, the Manufacture and Other Operations in Warehouse Regulations, a customs framework used by manufacturers to defer duties under bonded warehousing.

Paritosh Prajapati, chief executive officer of GX Group, a fiber-to-the-home and electronics components manufacturer, said the higher outlay shows confidence in the scheme’s execution.

“The increase in ECMS outlay from ₹22,919 crore to ₹40,000 crore reflects the government’s belief that electronics manufacturing has moved from policy intent to on-ground execution,” he said. “The focus is now shifting from assembly to building a resilient component ecosystem, which is critical in today’s fragmented global supply chains.”

Raghu Panicker, chief executive officer of semiconductor packaging firm Kaynes SemiCon, said, “This Budget marks a clear inflection. ISM 2.0 moves India from chip assembly to full-stack semiconductor sovereignty, equipment, materials, IP, and skills.” He added that execution at scale will depend on “speed, predictability, and sustained execution.”

Abhishek Garg, director at electronics manufacturing services firm DBG Technology Pvt. Ltd, said the budget “signals a transformative push for electronics, semiconductors and high-value tech manufacturing,” pointing to the emphasis on components, skills and investment incentives.

Analysts also said the policy focus on items such as printed circuit boards (PCBs), power electronics, radio-frequency (RF) subsystems, and semiconductor-adjacent packaging and testing is intended to push the ecosystem beyond assembly and into higher-value manufacturing.