New Delhi: Union Finance Minister Nirmala Sitharaman today laid out an expansive roadmap to deepen India’s semiconductor, electronics manufacturing and critical minerals ecosystem, signalling a decisive push to strengthen domestic capabilities and reduce import dependence in the Union Budget 2026-27.
Highlighting the gains made under the India Semiconductor Mission (ISM) 1.0, Sitharaman said the programme has significantly expanded India’s semiconductor sector capabilities. Building on this foundation, the government will launch ISM 2.0, with a sharper focus on manufacturing semiconductor equipment and materials, developing full-stack Indian intellectual property and strengthening supply chains.
According to Sitharaman, the next phase will also prioritise industry-led research and training centres aimed at advancing technology development and creating a skilled workforce aligned with future semiconductor needs.
The finance minister also announced a major expansion of the Electronics Components Manufacturing Scheme, which was launched in April 2025 with an outlay of Rs 22,919 crore. Sitharaman highlighted that the scheme has already attracted investment commitments and exceeded its initial targets.
To capitalise on this momentum, the government has now proposed to raise the outlay to Rs 40,000 crore, underscoring electronics components as a key pillar of India’s manufacturing ambitions.
On critical minerals, Sitharaman referred to the rare earth permanent magnets scheme launched in November 2025 and announced further steps to strengthen the value chain.
The Centre will support mineral-rich states, Odisha, Kerala, Andhra Pradesh and Tamil Nadu, in establishing dedicated rare-earth corridors.
These corridors will focus on mining, processing, research and manufacturing, with the objective of boosting domestic chemical production, reducing import dependency and securing strategic supply chains.
In a related move to bolster downstream manufacturing, the government will introduce a scheme to support states in setting up three dedicated chemical corridors through a challenge-based route, following a cluster-based plug-and-play model.
Emphasising that strong capital goods capability is a determinant of industrial competitiveness, Sitharaman announced that high-tech tool rooms will be established by central public sector enterprises at select locations. These will function as digitally enabled, automated service bureaus to locally design, test and manufacture high-precision components at scale and at lower cost.
Furthermore, to attract global investment and support critical digital infrastructure, the finance minister proposed a tax holiday till 2047 for data centres in India.
Foreign companies providing cloud services globally using data centre services from India will be eligible, provided they serve Indian customers through an Indian reseller entity. Sitharaman also announced a safe harbour of 15 per cent on costs where the data centre service provider in India is a related entity, aimed at leveraging just-in-time logistics for electronics manufacturing.
In addition, a safe harbour framework will be extended to non-residents for component warehousing in bonded warehouses at a profit margin of 2 per cent of invoice value. This would result in an effective tax incidence of about 0.7 per cent, which the government said would be significantly lower than in competing jurisdictions, offering a competitive edge to electronics manufacturing in India.
Anurag Awasthi, a noted Policy specialist in Semiconductors and Electronics: Budget 2026-27 gives out a very balanced and pragmatic outlay for the semiconductor and electronics sector. After an enabling ISM 1.0, which has been very successful in a very short span, ISM 2.0 will be a game-changer. ‘Display’ segment could also become an intrinsic part of the overall design, OSAT, discrete semiconductors and manufacturing footprint. A major impetus to R&D, IP development and skill development, as clearly outlined in the budget, clearly focuses on India becoming a ‘Product Nation’. Electronic Components Manufacturing is a highly complex sector that encompasses a diverse array of component types, intricate supply chains and specialised manufacturing processes. Within the broader electronics value chain, components manufacturing exhibits a significant investment-to-turnover ratio, necessitating longer gestation periods before profitability and returns on investment are realised. By increasing the ECMS outlay to 40,000 Cr with a unique 2 per cent profit margin support, this will be the thriving component of the manufacturing sector, to accrue competitiveness and drive substantial job creation. The announcement of Rare Earth and Solar corridors is futuristic, with enabling provisions to exempt Basic Customs Duty (BCD) in solar as well as critical minerals. With the desired emphasis on MSME and Tech support with a 10,000 Cr SME growth fund and much-needed impetus on logistics and warehousing reform, this budget could herald India’s technological as well as economic development towards a $1 trillion digital economy.”
Warren Harris, CEO & MD, Tata Technologies Ltd.: “By launching India Semiconductor Mission (ISM) 2.0 with a fortified INR 40,000 crore outlay for electronics manufacturing, the government has transitioned our ecosystem from assembly-led growth to high-value, full-stack IP and component sovereignty. The strong push on STEM education, AI integration and large-scale youth skilling is equally impactful. Initiatives to embed AI-enabled learning systems and expand research infrastructure reflect a clear commitment to building future-ready talent for Industry 4.0. At Tata Technologies, we welcome this Budget as a strong enabler of the Viksit Bharat vision, reinforcing India’s ambition to emerge as a global leader in digital engineering and R&D. Enhanced support for electronics manufacturing, including the expansion of component incentives to Rs 40,000 crore along with streamlined IT services frameworks and higher safe harbour thresholds of Rs 2,000 crore will further strengthen India’s innovation ecosystem. Incentives for aviation manufacturing and MRO will accelerate high-value engineering opportunities across mobility and aerospace. Overall, this Budget creates a robust platform for innovation-driven growth, advanced manufacturing and global technology leadership.”
Rajasekhar Papolu, Chairman & Managing Director, Brihaspathi Technologies Limited: “The focus on technology-led development, indigenous manufacturing, and skill creation will accelerate adoption of advanced solutions across smart cities, healthcare, manufacturing, and public safety. Strengthening domestic electronics and semiconductor ecosystems, alongside investments in future-ready skills, is particularly encouraging. Overall, the Budget supports self-reliance while fostering innovation, resilience, and long-term digital transformation.”
Together, the measures outlined in the Budget point to a coordinated strategy linking semiconductors, electronics, critical minerals, capital goods and digital infrastructure, as India seeks to position itself as a resilient and globally competitive manufacturing hub.
