The Union Budget 2026, unveiled by Hon'ble Union Finance Minister Nirmala Sitharaman, marks a pivotal moment in India's journey towards becoming a global technology and manufacturing powerhouse. This year's budget has not just allocated funds; it has strategically laid down a robust framework for an Atmanirbhar Bharat (self-reliant India) in the critical domains of semiconductors and electronics. The announcement of the India Semiconductor Mission (ISM) 2.0 and a significant outlay of ₹40,000 crore for electronics manufacturing underscores the government's unwavering commitment to fostering a vibrant domestic ecosystem, reducing import dependence, and propelling India onto the global stage as a leader in high-tech production. [1, 2]
In today's interconnected world, semiconductors are the bedrock of modern technology, powering everything from smartphones and artificial intelligence (AI) to electric vehicles and critical defense systems. The global semiconductor market, estimated at US$ 4.3 trillion in 2022, highlights the immense economic and strategic importance of this sector. [4] India's burgeoning digital economy and its ambition to become a global manufacturing hub necessitate a strong domestic semiconductor and electronics ecosystem. Historically, India has been largely reliant on imports for these crucial components, creating vulnerabilities in its supply chains and hindering its technological autonomy. [2, 5]
The "Make in India" initiative and the Production-Linked Incentive (PLI) schemes have already laid a strong foundation, especially in mobile phone manufacturing, where production has surged by 146% from ₹2.13 lakh crore in FY21 to ₹5.45 lakh crore in FY25. However, moving up the value chain – from assembly to design and advanced manufacturing – is the next logical and vital step. The Union Budget 2026 precisely addresses this by providing a targeted and enhanced push to this strategic sector. [2, 7]
Building upon the groundwork laid by ISM 1.0, which focused on establishing initial capabilities in the semiconductor sector, the India Semiconductor Mission (ISM) 2.0 is designed to be a comprehensive, "full-stack" program. Finance Minister Nirmala Sitharaman emphasized that ISM 2.0 aims to broaden the scope of the ecosystem by focusing on three key pillars: [1, 2]
ISM 2.0 will actively encourage the domestic manufacturing of specialized machinery and raw materials essential for semiconductor fabrication. This is a crucial shift, moving beyond just chip production to also creating the foundational components required to build a self-reliant supply chain. The government is "doubling down" its focus on creating equipment and intellectual property locally, including critical AI infrastructure. [1, 2]
This pillar signifies a strategic move up the value chain, from merely assembling to actively designing. ISM 2.0 will promote the development of indigenous intellectual property, nurturing Indian talent to create cutting-edge chip designs and system-level integration capabilities. [1, 2] The objective is to produce robust and powerful semiconductors for a range of applications, including automotive electronics and smartphones. [2] This also involves a focus on creating high-value jobs in chip design and advanced electronics manufacturing. [2]
Strengthening the resilience of local supply chains is paramount to mitigate risks associated with global geopolitical tensions and disruptions. ISM 2.0 will work towards creating a robust domestic supply chain, reducing India's dependence on foreign sources for critical components and materials. [1, 2] This aspect is expected to accelerate localization and enhance India's competitiveness in the global electronics landscape. [1]
ISM 2.0 has been allocated ₹1,000 crore for FY 2026-27, with the broader mission proposing a financial outlay of $20 billion (₹1.76 lakh crore), effectively doubling the allocation from ISM 1.0. This expanded scope includes compound semiconductor fabs, advanced packaging, display fabs, capital equipment manufacturing, and specialized chemicals and gases, with targeted subsidies of up to 50% fiscal support for ATMP/OSAT facilities. [12]
Complementing the India Semiconductor Mission 2.0 is the substantial increase in the outlay for the Electronics Components Manufacturing Scheme (ECMS) to ₹40,000 crore. This marks a significant jump from the earlier allocation of ₹22,919 crore, demonstrating the government's resolve to capitalize on the growing momentum in electronics manufacturing. [1, 14]
This increased allocation aims to:
- Strengthen Domestic Supply Chains: By boosting domestic production of electronic components, India aims to reduce import dependence and build a more self-reliant electronics ecosystem.
- Accelerate Localization: The funds will encourage localization, fostering a strong domestic component supply chain and improving affordability for consumer durables.
- Enhance Global Competitiveness: A robust domestic manufacturing base will enable Indian electronics brands to compete globally, delivering high-quality, affordable products to consumers.
- Attract Investment and Create Jobs: The expansion of electronics component manufacturing is well-positioned to attract new foreign direct investment and create high-value jobs.
The financial ministry's earmarking of ₹40,000 crore specifically focuses on scaling up assembly lines and encouraging investment in semiconductor ecosystems. This move has already seen a positive response from the market, with shares of Electronic Manufacturing Services (EMS) companies like Dixon Technologies and Kaynes Technology rising significantly after the announcement. [13]
The true power of these announcements lies in their synergistic effect. A thriving domestic semiconductor industry provides the essential building blocks for a robust electronics manufacturing sector. Conversely, a strong demand from the electronics sector fuels investment and innovation in semiconductor production. This creates a virtuous cycle of growth, where each sector reinforces the other.
Experts believe that this is not merely a manufacturing initiative but a strategic reset of India's technology ambition. By extending support beyond chip fabrication units (fabs) to include equipment, materials, design, and full-stack IP, the mission addresses a critical bottleneck in India's tech ecosystem. [10, 11] This comprehensive approach positions India not just as a consumer but as a creator of foundational digital infrastructure. [10]
The Union Budget 2026's emphasis on semiconductors and electronics is expected to have far-reaching positive impacts on the Indian economy:
- Job Creation: The program aims to create high-value jobs in chip design, system-level integration, and advanced electronics manufacturing. Furthermore, the parallel focus on employment generation and large-scale skilling in electronics manufacturing and emerging technologies will help create a future-ready workforce. [7]
- Reduced Import Dependence: By strengthening domestic value chains, India aims to significantly reduce its reliance on imports for electronic components and semiconductors.
- Boost to Exports: The framework is well-positioned to attract new foreign direct investment, which in turn will support the growth of electronics exports in the medium to long term. India is aiming to reach a 4-5% share in global electronics exports by 2030, with a goal to increase the value of its electronics production to US$ 500 billion by the same year. [4]
- Innovation and R&D: The focus on industry-led research and training centers under ISM 2.0 will foster innovation and develop advanced technologies.
- Global Positioning: These initiatives will solidify India's emergence as a global leader in electronics manufacturing and innovation, positioning the country higher on the global electronics value chain.
- Affordability: Increased domestic production and localization are expected to drive cost efficiencies, making consumer electronics more affordable.
While the announcements are highly encouraging, the journey ahead will not be without its challenges. The Indian semiconductor business is still in a nascent stage and requires significant hand-holding and policy support. [10] Semiconductor projects, by their nature, have long construction timelines (typically 36-60 months), necessitating long-term policy stability and commitment. [5] Attracting and retaining top talent, ensuring access to cutting-edge technology, and fostering a collaborative ecosystem between industry, academia, and government will be crucial for success.
However, the opportunities are immense. India's internal semiconductor demand over the next five years is expected to account for nearly 10% of global consumption, providing a strong business case for domestic manufacturing. [5] Initiatives like the recently concluded India-EU Free Trade Agreement also open new avenues for technology collaboration and exports, reinforcing India's position as a preferred manufacturing hub. [1]
- For Businesses and Investors: The enhanced outlay and strategic direction provide a clear roadmap for sustained investments in manufacturing, technology, and talent. Companies in the EMS segment and those involved in semiconductor equipment and materials stand to benefit significantly. [13, 7]
- For Startups and Innovators: The emphasis on indigenous IP design and industry-led research centers presents a fertile ground for deep-tech startups and innovation in chip design.
- For the Workforce: The focus on skilling and creating high-value jobs will open up new avenues for engineers and skilled professionals in the electronics and semiconductor sectors.
- For Consumers: Increased domestic production is expected to lead to more affordable and readily available electronic products.
India's Union Budget 2026 has unequivocally declared its intent to become a self-reliant and globally competitive force in semiconductors and electronics manufacturing. The launch of India Semiconductor Mission 2.0, with its comprehensive approach to equipment, materials, IP design, and supply chain fortification, coupled with the monumental ₹40,000 crore allocation for electronics manufacturing, signals a transformative era. [1, 2]
This strategic vision, backed by significant financial commitment and a forward-looking policy framework, is poised to unlock immense potential. As India continues its acceleration as a global electronics manufacturing hub, these initiatives will not only drive economic growth and create millions of jobs but also solidify the nation's position at the forefront of the global technological revolution. The future, truly, is Made in India. [18, 4]
- fonearena.com
- hdfcsky.com
- ddnews.gov.in
- ibef.org
- economictimes.com
- economictimes.com
- indiatimes.com
- hindustantimes.com
Featured image by Gayatri Malhotra on Unsplash
