Industry Reacts to Budget 2026–27 Push on Semiconductors, Manufacturing, And Rare Earths

The Finance Minister presented the Union Budget 20267-27 on February 1. It was her 9th consecutive time presenting the budget.

The 2026-27 budget represents a delicate balancing act, where it is combining fiscal discipline with a record public capital expenditure of ₹12.2 lakh crore, while maintaining a growth rate of around 7% and reducing the fiscal deficit to 4.3% of GDP.

The Finance Minister said, “India will move forward confidently towards Viksit Bharat, while ensuring that growth is inclusive. As the economy and trade expand, the country will remain closely connected to global markets by boosting exports and attracting stable long-term investment.”

Nirmala Sitharaman added that, “This is the first Budget prepared in Kartavya Bhawan, we are inspired by 3 'kartavyas'.” The policies are largely built on these. She outlined three fundamental kartavyas (duties) that frame the government's economic vision. 

The first kartavya largely aims to boost and sustain economic growth by improving productivity, competitiveness, and resilience to global uncertainties. Industry leaders have welcomed the government’s focus on manufacturing, technology and infrastructure as key drivers of the first kartavya, saying inclusive growth will depend not just on policy intent but on building real capacity across strategic sectors.

They broadly supported the launch of the India Semiconductor Mission (ISM) 2.0 and the expanded push on rare earth minerals, calling them important steps toward self-reliance in chips and critical materials, while also cautioning that their success hinges on sustained policy support and effective execution.

Semiconductors And Rare Earth Minerals

India will launch the India Semiconductor Mission (ISM) 2.0, building on the progress made under ISM 1.0, to strengthen the country’s semiconductor ecosystem, Finance Minister Nirmala Sitharaman said in her Budget 2026–27 speech.

The new phase will focus on domestic production of semiconductor equipment and materials, development of full-stack Indian intellectual property, and strengthening of supply chains. The government will also promote industry-led research and training centres to support technology development and create a skilled workforce for the sector. 

The push is also supported by parallel measures on rare earth minerals, with dedicated Rare Earth Corridors planned in mineral-rich states to boost mining, processing and manufacturing of critical materials used in semiconductor equipment and advanced electronics, helping reduce import dependence and strengthen the overall supply chain.

Anil Joshi, Managing Partner at Unicorn India Ventures, said ISM 2.0 (India Semiconductor Mission 2.0) would help “mushroom genuine semiconductor use cases” and resolve supply issues through the ₹40,000 crore electronics components outlay, while Manu Iyer, Co-founder of Bluehill.VC, described the move as a “watershed moment” that could position India as a globally competitive semiconductor hub. Rajul Bohra, Partner at JSA Advocates said, the focus on equipment, materials and full-stack Indian IP was “much needed”, and Sujay Shetty, MD at PwC India said, the rare earth corridors would address critical supply-chain vulnerabilities.

However, some leaders struck a more cautious note. Raja Manickam, CEO of iVP Semi said, the opportunity would only translate into impact if funding is channelled towards building strong Indian product companies, while Bhaktha Keshavachar, CEO of Chara Technologies said, rare-earth mining must be complemented by incentives for alternative technologies such as rare-earth-free motors.

Sanjeev Kumar Gupta, CEO of KDEM pointed out that India still lacks dedicated R&D tax incentives comparable to global peers, adding that "the next decade will define whether we capture value or remain assemblers".

Raja Lahiri and Akshay Garkel, Partners at Grant Thornton Bharat said, the mission could catalyse investment and innovation but warned that long-term competitiveness would depend on India gaining control over critical technologies. They added that strengthening domestic fabrication and testing would reduce import dependence and improve supply-chain security, but stressed that sustained regulatory clarity and effective execution will determine whether India becomes a creator of core technologies or continues as an assembler. 

Manufacturing And ECMS 

In parallel, the outlay for the Electronics Components Manufacturing Scheme (ECMS) will be raised to ₹40,000 crore from ₹22,919 crore after it attracted investment commitments worth twice its original target, supporting chip design and component manufacturing.

Industry leaders said the government’s decision to raise the outlay for the Electronics Components Manufacturing Scheme (ECMS) to ₹40,000 crore would significantly strengthen India’s domestic manufacturing base and reduce dependence on imported components, especially in consumer electronics and high-value manufacturing.

Mukundan Menon, MD of Voltas, said the enhanced allocation would deepen domestic value addition and improve India’s competitiveness in global value chains, adding that it would also help improve affordability for consumers by lowering costs through localisation.

Ravi Agarwal, Co-Founder and MD of Cellecor, described the near doubling of the scheme from ₹22,919 crore as a meaningful step towards building a stronger domestic component supply chain, while Pankaj Rana, CEO of Hisense India, said the sustained policy focus on electronics components and semiconductors would create a stable and growth-oriented environment for long-term investments and localisation.

Tadashi Chiba, MD and CEO of Panasonic India, said measures such as ECMS and customs duty exemptions on select appliances would improve cost efficiencies and encourage domestic value creation, strengthening India’s manufacturing ecosystem.

At the same time, industry leaders cautioned that the success of the scheme would depend on execution and broader system-level reforms.

Vinod Kumar, Partner and Leader – Manufacturing at PwC India, said India’s manufacturing journey is moving from policy intent to capacity creation, but warned that outcomes will hinge on how effectively structural, regulatory and infrastructural bottlenecks are addressed.

Aravind Melligeri of Aequs Limited said allowing eligible SEZ (Special Economic Zone) units to sell into the domestic market at concessional duty would improve capacity utilisation and operating efficiency for capital-intensive manufacturers, but added that a more permanent framework would be needed to fully support strategic sectors.

Dhaval Radia of ZEISS Group said future value creation would increasingly depend on the competitiveness of the operating environment, pointing to the need for simpler customs procedures, predictable tax interpretation and reduced regulatory overlaps.

Overall, industry views the expanded ECMS as a positive push up the electronics value chain, but says clear policies, easier compliance and faster execution are needed to turn budget support into real factories and jobs.

Execution In The Years Ahead

The Union Budget 2026-27 marks a significant push in India's semiconductor ambitions. With ISM 2.0, ₹40,000 crore for electronics components, and focus on rare earth minerals.

Recently, the Union Minister for Electronics and Information Technology Ashwini Vaishnaw had said that the government had set a clear target of meeting 70% to 75% of domestic chip needs by 2029 and developing advanced 3nm and 2nm technology nodes by the early 2030s. The shift in global perception is notable, from initial skepticism in 2022, international partners are now actively seeking collaboration with India's semiconductor ecosystem. Four major fabrication plants are expected to begin commercial operations in 2026, while facilities like the Tata-Powerchip plant in Dholera are already installing equipment.

Industry leaders acknowledge these as positive steps but caution that success depends on sustained execution. Building competitive semiconductor manufacturing requires massive capital, cutting-edge technology, skilled talent, and regulatory clarity maintained over years. The India-EU FTA reducing machinery import duties to zero and the government's progress in training over 67,000 semiconductor professionals show momentum.

The policies, funding and global partnerships are in place, but whether India can turn them into working chip factories and a strong global presence will depend on execution in the years ahead.