The government’s increased allocation for electronics manufacturing under Production Linked Incentive (PLI) scheme in Budget FY26 pleased industry players, who were however disappointed that there was no mention of of a scheme for components of electronics or clarity on how the India Semiconductor Mission will go forward .

There is an allocation of ₹9,000 crore for electronics manufacturing PLI in the Budget announced on Saturday, a 45 per cent increase from the ₹6,200 crore allocation in the previous Budget. Only ₹5,777 crore of the allocation was spent last year.

The PLI can be split into two parts, the first dedicated to larger scale electronics manufacturing (₹8,885 crore) and the other for IT hardware (₹115 crore). In 2023, the Cabinet had doubled the outlay to this scheme to ₹17,000 crore, extended over the next six years to encourage domestic production of IT hardware.

No scheme for components

Responding to the Budget announcement, industry bodies like the India Cellular and Electronics Association (ICEA) and the Indian Electronics and Semiconductor Association (IESA) commended the emphasis given to electronics manufacturing sector compared to the previous year. However, they also pointed out that the Budget failed to introduce a major PLI scheme for components or a dedicated product creation initiative as a growth driver. “This could potentially slow the pace of value addition in India’s electronics ecosystem. We remain optimistic that these aspects will be addressed through specific policy measures beyond the Budget announcement,” said Ashok Chandak, President of the IESA.

Earlier, entities other than the IESA, like the Optiemus Electronics stressed the need for components manufacturing PLI to reduce dependence on imports from China and Hong Kong. Even the ICEA had recommended a cumulative outlay of approximately ₹40,000 crore for building the components and sub-assembly ecosystem in a pre-Budget letter. However, the ICEA made no mention of the scheme specifically following the announcement of the Budget.

No allocation

The Budget also increased funds to the Modified Programme for Development of Semiconductors to ₹7,000 crore after spending ₹3,816 crore in 2024. However, the IESA noted that the Budget failed to expand on the India Semiconductor Mission 2.0 or Semicon 2.0. The government announced the second phase of this mission, seeking to develop India’s semiconductors, display manufacturing and design ecosystem in September 2024. At the time, Ashwini Vaishnaw, Minister of Electronics and IT, had said Semicon 2.0 would be set in motion within 3-4 months of the announcement. However, he had refrained from sharing any further details on the subject.

‘The Budget 2025 lacks clarity and is being muted on ISM 2.0 the incentive for semiconductor manufacturing beyond $10 billion that was announced earlier,” said Chandak.

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