India’s Union Budget 2026–27 has reinforced the government’s focus on electronics and semiconductor manufacturing, positioning the sector as a key driver of industrial growth and self-reliance. Presented by Finance Minister Nirmala Sitharaman on February 1, the budget sets total expenditure at Rs 53.47 lakh crore and maintains capital expenditure at Rs 12.2 lakh crore, underscoring continuity in infrastructure-led development alongside targeted industrial incentives.
While major allocations for defence, transport, and rural development remain intact, electronics manufacturing has received enhanced policy attention. The Ministry of Electronics and Information Technology (MeitY) has been allocated Rs 21,632 crore, reflecting the sector’s expanding role in India’s manufacturing and export strategy.
A central announcement in the budget is the expansion of the Electronics Components Manufacturing Scheme (ECMS). Introduced in 2025 with an outlay of Rs 22,919 crore, the scheme has now been scaled up to Rs 40,000 crore following strong industry participation. According to government data, ECMS attracted 149 applications, significantly exceeding initial expectations. The scheme focuses on domestic production of key components such as printed circuit boards, camera and display modules, capacitors, and lithium battery enclosures, with the objective of reducing import dependence and strengthening upstream supply chains.
Large-scale electronics manufacturing continues to be the largest contributor among production-linked incentive (PLI) sectors, with cumulative investments reaching Rs 38,645 crore. The government expects the expanded ECMS outlay to further deepen domestic value addition and support integrated manufacturing clusters.
The budget also advances India’s semiconductor roadmap through the launch of India Semiconductor Mission (ISM) 2.0. Building on ISM 1.0—which enabled projects such as Micron’s semiconductor facility in Gujarat—ISM 2.0 expands the focus to include semiconductor equipment, materials, full-stack intellectual property, and supply-chain capabilities. Under the new phase, the government will offer fiscal support of up to 50 percent of project costs for fabrication units across technology nodes. Additional incentives include state-level SGST exemptions of up to 10 years, interest subsidies, and employee cost reimbursements. The government reiterated its objective of enabling commercial chip production beginning in 2026.
Tax and customs measures announced in the budget are intended to improve India’s investment climate for electronics and semiconductor companies. Foreign firms providing cloud services through India-based data centres will be eligible for income tax holidays until 2047, while related data centre entities will benefit from a 15 percent safe harbour on costs. Toll manufacturers operating in bonded zones and producing electronic goods will receive a five-year tax holiday from April 1, 2026. Units in International Financial Services Centres will see tax holidays extended to 20 years, followed by a concessional tax rate.
Customs duty exemptions have also been extended until March 31, 2028, for machinery, equipment, and parts used in semiconductor wafer fabrication and chip assembly, testing, marking, and packaging. Similar exemptions apply to tools, display panel inputs, and lithium-ion battery components.
These measures come at a time of sustained growth in the sector. Electronics production has increased six-fold over the past decade to Rs 11.3 lakh crore in FY25, while exports have risen eight-fold to Rs 3.3 lakh crore. With Budget 2026–27, the government has signalled its intent to move India up the electronics and semiconductor value chain through policy continuity, fiscal support, and targeted reforms.
