Budget: Higher ECMS outlay, ISM 2.0 send strong signal to chip industry

Industry executives say Budget's higher allocation for ECMS and announcement of ISM 2.0 underline a renewed policy push to strengthen India's electronics manufacturing base and semicon supply chains

The Union Budget 2026-27’s decision to increase the outlay for the less-than-a-year-old Electronics Component Manufacturing Scheme (ECMS), along with the announcement of the next phase of the India Semiconductor Mission (ISM), signals a renewed focus on enhancing India’s position in the global electronics and semiconductor supply chain ecosystem, industry executives and experts said.

 

In her Budget speech on Sunday, Finance Minister Nirmala Sitharaman announced that the ECMS outlay, approved by the Union Cabinet in April 2025, will rise from ₹22,919 crore to ₹40,000 crore. She also announced that the government would soon launch the second phase of ISM, with ₹1,000 crore allocated for ISM 2.0 in the current financial year (2025-26).

 

The expansion of ECMS reaffirms the government’s long-term commitment to building resilient domestic supply chains and strengthening India’s role in global value chains, said the India Cellular & Electronics Association.

 

“The additional ₹40,000 crore outlay for ECMS could catalyse substantial investments, enhance domestic value addition, generate high-quality employment, and solidify India’s emergence as a global leader in electronics manufacturing and innovation,” said Sujay Shetty, managing director (MD) of electronics system design and manufacturing and semiconductor practice at PwC India.

 

Launched in April 2025, ECMS has so far approved 46 applications with a cumulative investment of ₹54,567 crore. These projects are estimated to generate ₹3.67 trillion in production and are expected to create direct employment for nearly 51,000 people.

 

The 46 projects, spread across 11 states, will produce electronics components including printed circuit boards, capacitors, connectors, mobile phone and other device enclosures, lithium-ion cells, camera and display modules, optical transceivers, aluminium extrusions, anode materials, and copper-clad laminates. These components feed into the manufacturing of products such as mobile phones, laptops, televisions, computer displays, and servers.

 

“We had expected 50–55 applications for ECMS, but received 149 in total. The decision to raise the outlay to ₹40,000 crore will help sustain that momentum and bring more companies under the scheme,” Union Minister for Electronics & Information Technology Ashwini Vaishnaw said during a post-Budget briefing on Sunday.

 

For ECMS to achieve its intended impact, it is crucial that the necessary infrastructure enablers are in place and the scheme is implemented efficiently. Timely execution will be key to translating policy intent into tangible outcomes, said Sanjeev Agarwal, executive director and chief manufacturing officer of homegrown electronics and mobile phone maker Lava International.

 

The announcement of ISM 2.0 itself is an important signal for India’s semiconductor ambitions, marking a shift from a fabrication-centric approach to a full value-chain strategy covering equipment, materials, Indian intellectual property, and supply-chain resilience, said Ashok Chandak, president of the India Electronics and Semiconductor Association.

 

The move also reflects that India is no longer in catch-up mode within the semiconductor manufacturing ecosystem, said Shashwath T R, cofounder and chief executive officer (CEO) of Mindgrove Technologies. “By enabling industry-led research and development and fostering talent depth, ISM 2.0 unlocks scalable innovation, strengthens export competitiveness, and positions India to lead in high-growth semiconductor applications across artificial intelligence, the Internet of Things, and next-generation computing,” he added.

 

Beyond these two measures, the exemption of basic Customs duty on select electrical appliances, including microwaves, is a timely initiative that will improve cost efficiencies, encourage domestic value creation, and boost market adoption, said Tadashi Chiba, MD and CEO of Panasonic India.