Budget FY27: India Launches Second Semiconductor Scheme, Electronics Incentive Hiked to ₹40,000 Crore
The Union Budget for the fiscal year 2026-27 has unveiled a robust push to fortify India's electronics and semiconductor manufacturing ecosystem, with the approval of a second semiconductor incentive programme and a significant expansion of the electronics component manufacturing scheme.
India Semiconductor Mission 2.0: A Strategic Leap Forward
In a landmark announcement during her Budget speech on February 1, Union Finance Minister Nirmala Sitharaman introduced India Semiconductor Mission 2.0 (ISM 2.0), building upon the successes of the initial phase. This new scheme is strategically designed to propel domestic companies up the value chain by supporting the design of full-stack Indian intellectual property and strengthening the country's chip supply ecosystem.
"India Semiconductor Mission 1.0 expanded India's semiconductor sector capabilities. Building on this, we will launch ISM 2.0 to produce equipment and materials, design full-stack Indian IP, and fortify supply chains," Sitharaman stated. The initiative will also focus on establishing industrial research and training centres to develop cutting-edge technology and cultivate a skilled workforce.
Electronics Component Manufacturing Scheme Gets Major Boost
Simultaneously, the government has announced a substantial enhancement to the Electronics Component Manufacturing Scheme (ECMS), increasing its net outlay to ₹40,000 crore. This expansion comes less than a year after the programme's initial rollout in April 2025, which began with an outlay of ₹22,919 crore.
"The ECMS launched in April 2025 with an outlay of ₹22,919 crore, already has investment commitments at double the target. We propose to increase the outlay to ₹40,000 crore to capitalize on this momentum," the Finance Minister elaborated. This move underscores the government's intensified efforts to deepen electronics manufacturing capabilities and reduce import dependence.
Building on Existing Foundations
ISM 2.0 is expected to place greater emphasis on semiconductor components and allied capabilities, complementing the fabrication plants and chip testing and packaging units approved under the first tranche of the mission. The enhanced focus aims to create a more comprehensive and self-reliant semiconductor ecosystem within the country.
The ECMS programme, which accepted applications until September 30 last year, has already demonstrated significant traction with three tranches of approvals. Notably, the largest approval of ₹27,166 crore in investments came from prominent players including Tata Group, auto-parts major Motherson, and Taiwan's contract manufacturer Foxconn on January 2.
Future Implications and Project Approvals
With the augmented allocation, the Ministry of Electronics and Information Technology is poised to approve additional projects throughout 2026, further accelerating India's position in the global electronics supply chain. This dual-pronged approach in the Budget reflects a strategic vision to transform India into a manufacturing powerhouse while fostering technological innovation and self-sufficiency in critical sectors.
