Budget 2026 | India Boosts Chip & Electronics with ₹40,000 Crore Incentive, 2026

India Accelerates Domestic Chip & Electronics Production

India’s government on February 1, 2026, approved a second semiconductor scheme and increased electronics incentives to ₹40,000 crore.

The allocation marks a significant escalation in New Delhi’s strategy to foster a robust domestic supply chain for critical electronic components and semiconductors. This initiative follows the initial Production-Linked Incentive (PLI) scheme introduced in 2021, which aimed to attract global manufacturers. The new scheme signals a shift towards deeper indigenous manufacturing capabilities within the country.

The enhanced outlay of ₹40,000 crore (approximately $4.8 billion USD) specifically targets a wider array of electronics manufacturing, beyond the initial focus on mobile phones and select components. While precise details of the second semiconductor scheme have not been fully disclosed, it is confirmed to include incentives for advanced packaging, design, and fabrication units. This aims to reduce reliance on foreign imports across various sectors.

The initial PLI scheme for large-scale electronics manufacturing, launched in April 2020, allocated ₹38,645 crore and had attracted investments from companies like Foxconn and Samsung. The government has not yet confirmed whether the new semiconductor scheme will operate as an extension of the existing India Semiconductor Mission (ISM) or as a distinct, parallel program with revised eligibility criteria and objectives.

Strategic Differentiation in Industrial Policy

This latest government initiative differs from conventional foreign direct investment (FDI) promotion by explicitly prioritizing the establishment of a comprehensive domestic electronics ecosystem rather than solely attracting assembly operations. Its scope extends beyond direct manufacturing subsidies to include research and development (R&D) support and skill development programs. This strategic shift aims to create self-sufficiency in critical technologies.

The expanded incentive program is not primarily designed as a short-term employment generation scheme or merely a re-badging of existing subsidies. It deliberately avoids a "race to the bottom" approach common in some incentive programs, where the primary goal is attracting companies through minimal regulatory burdens alone. Instead, it seeks to build long-term, high-value industrial capabilities from the ground up.

This distinction is editorially relevant because it indicates a pivot from simply incentivizing production volumes to fostering a vertically integrated industry, from chip design to final product assembly. It suggests a more sustainable and resilient approach to technological independence, aiming to insulate India from global supply chain disruptions. The focus is on robust capability building within India.

Market Relevance and Policy Implications

The doubling down on semiconductor and electronics incentives reflects a global trend among major economies to localize critical technology supply chains, exacerbated by geopolitical tensions and recent disruptions. Nations like the United States (CHIPS Act) and European Union (European Chips Act) have also enacted significant legislation to bolster domestic chip production, recognizing its strategic importance. This positions India competitively on the global stage.

Beyond economic growth, this policy holds significant geopolitical and national security implications. Building domestic capacity in semiconductors and electronics strengthens India's strategic autonomy in defense, telecommunications, and other critical infrastructure. It positions India as a potential hub for technology manufacturing, potentially altering global supply chain dynamics over the next decade. This underscores the policy's long-term vision for the nation.

Impact and Future Outlook

This development matters now because it solidifies India’s long-term industrial policy direction, committing substantial public funds to a sector vital for digital transformation and economic sovereignty. The approval of a second scheme signals government confidence and sustained commitment, providing a clearer investment environment for both domestic and international players looking to establish operations. This creates a predictable trajectory for industry growth.

Domestic electronics manufacturers, design houses, and semiconductor fabrication aspirants stand to benefit directly from the expanded incentives and R&D support. Indirectly, the move could create new employment opportunities in high-tech sectors and reduce India’s vulnerability to global chip shortages. However, the precise impact on consumer pricing and export competitiveness remains to be seen. Foreign investors also face new opportunities to participate in this growth.

The increased incentives and new semiconductor scheme are expected to accelerate the pace of investment in India’s electronics manufacturing sector. It shifts India from predominantly being an importer and assembler to a potential exporter and innovator of electronic components and semiconductors. This fundamental shift could redefine India’s role in the global technology landscape by the end of the decade. The policy could lead to increased self-reliance.

People Also Ask (PAA)

What is India's new semiconductor scheme?
India's government approved a second semiconductor manufacturing scheme, complementing existing incentives. It focuses on establishing comprehensive domestic capabilities in design, fabrication, and advanced packaging, aiming to reduce reliance on imports and build a resilient supply chain for critical electronic components within the country.

How much are India's electronics incentives increasing?
The Union Government has increased the total electronics production incentives to ₹40,000 crore (approximately $4.8 billion USD). This expanded outlay specifically targets a wider range of electronics manufacturing activities, including both discrete components and finished products, to foster a robust indigenous industry.

Why is India investing heavily in semiconductors?
India is investing heavily in semiconductors to achieve strategic autonomy, boost economic growth, and ensure national security. Global supply chain disruptions and geopolitical factors have highlighted the critical importance of domestic chip production for defense, telecommunications, and other essential industries.

Who benefits from India's expanded electronics incentives?
Domestic electronics manufacturers, semiconductor design firms, and potential fabrication unit developers are the primary beneficiaries. The incentives aim to attract investments, create high-tech employment, and develop local expertise, positioning India as a significant player in the global electronics manufacturing landscape.

What is the difference between this and previous schemes?
This latest initiative moves beyond solely attracting assembly operations by prioritizing the establishment of a comprehensive domestic electronics ecosystem. It integrates R&D support and skill development, focusing on building long-term, high-value industrial capabilities rather than just short-term production volumes.

Will this reduce India's reliance on foreign electronics?
Yes, the expanded incentives and new semiconductor scheme are explicitly designed to accelerate the development of indigenous manufacturing capabilities. This is intended to significantly reduce India's reliance on foreign imports for critical electronic components and semiconductors over the coming years, fostering greater self-sufficiency.