India Doubles Down on Tech Manufacturing with New Budget Initiatives
India’s federal goverment has unveiled a series of measures aimed at bolstering its technology manufacturing sector, with a strong focus on semiconductors, electronics components, and critical minerals. these initiatives, announced as part of the Union Budget 2026, signal a continued commitment to reducing reliance on imports and positioning India as a key player in global supply chains, particularly as companies diversify away from geopolitical hotspots. The moves come amid increasing global demand for AI infrastructure and a desire to capitalize on shifting supply chain dynamics.
boosting Semiconductor Production
The government will launch a second phase of the India Semiconductor Mission,building on the initial programme launched in 2023 . This next phase will concentrate on the growth and production of semiconductor equipment and materials, fostering domestic intellectual property (IP) for full-stack chip design, and strengthening the overall supply chain. A key component will be supporting industry-led research and training centers to cultivate a skilled workforce capable of meeting the demands of a growing semiconductor industry.
Expanding Electronics Component Manufacturing
Recognizing the success of the Production Linked Incentive (PLI) scheme, the government has significantly increased the financial outlay for the Electronics Components Manufacturing Scheme to ₹400 billion (approximately $4.83 billion USD as of February 1, 2026) , up from ₹229.19 billion (around $2.76 billion USD). The scheme, initially launched in April 2025, has already attracted investment exceeding its original targets.
The scheme provides financial incentives linked to incremental production and investment. Companies manufacturing essential components like printed circuit boards (PCBs), camera modules, connectors, and parts for smartphones, servers, and data centers are eligible for reimbursements of a portion of their costs. This output-linked incentive structure is designed to attract global suppliers and reduce India’s dependence on imported electronics components.
Tax Benefits for Electronics Toll Manufacturers
To further incentivize investment, the budget proposes a five-year tax exemption, starting in April 2026, for foreign companies supplying equipment and tooling to electronics toll manufacturers operating within bonded zones. This is expected to particularly benefit companies like Apple, which relies heavily on contract manufacturing in India. Apple had previously sought clarification from the Indian government regarding the tax implications of importing high-end iPhone production equipment.
Securing Critical Mineral Supply Chains
India is also addressing vulnerabilities in its access to critical minerals, essential for the production of electric vehicles, electronics, and defense systems. Global supply chain disruptions, particularly concerning rare earth materials dominated by China, have highlighted the need for domestic sourcing.The government will support mineral-rich states – including Odisha, Kerala, Andhra Pradesh, and Tamil Nadu – in establishing dedicated “rare earth corridors” to promote mining, processing, research, and manufacturing.
This initiative builds upon a seven-year incentive program approved in late 2023 to boost domestic production of rare-earth magnets, aiming to lessen reliance on Chinese supplies.
Facilitating Cross-Border E-commerce
The government is also taking steps to support smaller businesses by removing the ₹1 million (approximately $12,000 USD) value cap on per-consignment courier exports.This move is expected to benefit small manufacturers, artisans, and startups selling goods overseas through online platforms. Furthermore, the government will streamline the handling of rejected and returned shipments using technology to address a long-standing challenge for exporters.
Key Takeaways
- Increased investment in semiconductor manufacturing, focusing on materials, IP, and workforce development.
- Expansion of the Electronics Components Manufacturing Scheme to attract global suppliers.
- Tax exemptions for equipment used in electronics toll manufacturing.
- Initiatives to secure critical mineral supply chains, particularly rare earth materials.
- Support for cross-border e-commerce to help small businesses reach global markets.
these measures demonstrate India’s ambition to become a meaningful global hub for technology infrastructure, encompassing cloud computing, electronics manufacturing, and critical minerals. The success of this strategy will depend on effective implementation, including ensuring reliable infrastructure and sustained support for domestic innovation, as global companies assess India’s potential in the evolving AI era.
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