Introduction
The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on February 1, marked a significant shift in India’s approach to semiconductor and electronics manufacturing.
With a substantial increase in allocations for semiconductors and mobile production, the government aims to accelerate domestic manufacturing, enhance India’s position in the global supply chain, and drive the Make in India initiative forward.
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Key Budgetary Announcements
1. Surge in Semiconductor Funding
The budget for semiconductors has witnessed a massive 83% increase, reaching ₹7,000 crore for FY26. This funding is a strategic move to develop India’s semiconductor ecosystem, reducing reliance on imports and boosting domestic chip manufacturing.
Allocation Over the Years
Financial Year | Semiconductors + Display (₹ crore) | PLI (Electronics + Hardware) (₹ crore) |
---|---|---|
2023-24 | 1,503 | 4,560 |
2024-25 | 6,903 | 6,200 |
2025-26 | 7,000 | 9,000 |
2. Revised Estimates for Semiconductor Segments
Despite the increase in overall funding, some segments saw downward revisions in FY25 due to slower-than-expected project implementation. The revised allocation for key semiconductor areas in FY25 was as follows:
- Compound Semiconductors, ATMP, and OSAT: Revised from ₹4,203 crore to ₹2,500 crore.
- Semiconductor Fabs: Revised from ₹1,500 crore to ₹1,200 crore.
However, for FY26, these allocations have been increased:
- Compound Semiconductors, ATMP, and OSAT: ₹3,900 crore.
- Semiconductor Fabs: ₹2,500 crore.
These revisions reflect a more realistic approach to funding based on the progress of projects and industry readiness.
3. Expansion of the Production-Linked Incentive (PLI) Scheme
The PLI scheme for mobile manufacturing has seen a significant 55% increase, now reaching ₹9,000 crore. This reflects the success of India’s smartphone sector, which has become a key driver of the country’s electronics exports.
PLI Allocation for Electronics
A new allocation of ₹8,885 crore has been announced for the electronics sector, marking a sharp rise from the revised estimate of ₹5,747 crore in FY25. This increase is expected to further strengthen domestic production and attract global manufacturers.
4. Customs Duty Revisions to Support Domestic Manufacturing
To encourage local manufacturing and reduce dependency on imports, the government has introduced the following changes:
- Increased Basic Customs Duty on Interactive Flat Panel Displays: Raised from 10% to 20%.
- Reduced Duty on Open Cells and Other Components: Lowered to 5%.
- Exemption of Customs Duty on Open Cells for LCD and LED TVs: Previously reduced from 5% to 2.5%, now fully exempt.
These measures aim to make India a more attractive destination for electronics manufacturing by reducing production costs and enhancing global competitiveness.
5. Tax Incentives for Foreign Investors
A new presumptive taxation regime has been proposed for non-residents providing services to Indian companies setting up or operating electronics manufacturing facilities. Additionally, a safe harbour provision will provide tax certainty for non-residents storing components for supply to specified manufacturing units.
These measures are expected to attract more foreign investments by offering a predictable and simplified tax regime.
India’s Vision: A $500 Billion Electronics Industry by FY30
Prime Minister Narendra Modi has set an ambitious target for India’s electronics industry to reach $500 billion by FY30. The allocations play a crucial role in achieving this vision by strengthening the three key pillars of India’s electronics strategy:
- Semiconductor Programme: Building a robust semiconductor ecosystem.
- PLI Schemes: Incentivizing large-scale electronics and IT hardware manufacturing.
- Policy Support: Providing fiscal incentives, tax benefits, and customs duty adjustments.
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Conclusion
The Union Budget 2025 reaffirms India’s commitment to becoming a global hub for semiconductor and electronics manufacturing. With increased financial support, strategic policy adjustments, and a focus on domestic production, India is well on its way to reducing import dependency and establishing itself as a leader in the global technology landscape.
As the industry gears up to leverage these incentives, the next few years will be crucial in determining India’s success in building a self-reliant and globally competitive semiconductor and electronics sector.