New Delhi: India’s electronics and semiconductor industries are expecting a number of incentives from the upcoming FY26 Union budget, largely focused on increasing the domestic value addition in a steadily growing industry, consultants and stakeholders said.
With finance minister Nirmala Sitharaman set to unveil the budget on 1 February, the electronics retail, manufacturing and design industries have made submissions for benefits that include tweaks to customs and income tax duty structures to favour local ventures, outright incentivization of electronics component manufacturing, supporting private research and development (R&D) teams to build products locally, and the creation of new full-sized ports and metropolitan cities that would revive consumption and upgrade India’s logistics and distribution networks.
Two senior officials who work closely with the ministry of electronics and information technology (Meity) said that proposals have been submitted for a comprehensive incentivization scheme for the manufacturing of components in India’s electronics ecosystem. While an exact amount remains in the discretion of the ministry of finance, the two officials cited above said that an outlay of “over ₹10,000 crore ($1.1 billion)” is expected on 1 February.
On 12 December, Mint reported that Meity was in the process of framing a $3 billion (about ₹30,000 crore) incentives outlay to boost component makers, R&D and design of product and intellectual property in the country. On 2 January, Mint also reported that with net cumulative revenue in India’s electronics industry falling short of $150 billion as of calendar year 2024, the Centre’s target for the industry generating $500 billion in revenue by 2030 looks ambitious.
The slowing pace of growth of the electronics industry and slim value generation are key concerns. Industry experts said that with India’s electronics manufacturing services (EMS) sector largely assembling products, the amount of the generated revenue that remains within India—thus qualifying as domestic value addition—is “around 15%.”
Ashok Chandak, president of industry body India Electronics and Semiconductor Association, said that the limited value generation is a key cause of concern. “Even as we aim to chart a course to $500 billion in revenue for the local electronics market, the key aim has to be domestic value addition. Even today, the local value generation remains at around 15%—this needs to go up to at least 30%, or more in specific categories of the industry. To do this, a comprehensive component incentivization plan is key,” Chandak said.
Chandak added that a second tranche of incentives for the India Semiconductor Mission is also expected at the upcoming FY26 budget. On 10 September, Mint reported that the second round of semiconductor incentives, amounting to $15 billion, was submitted for Cabinet approval.
Nitin Kunkolienker, chairman of the board of directors at industry body Manufacturers Association of Information Technology (Mait), said that key demands from the industry “include an ask to rationalize import duty structures of various key electronics components, in order to make the industry competitive and attractive for local manufacturing.”
“Stabilizing our tariff structure is key to showcasing India as a more mature manufacturing economy for electronics. In the current scheme of things, drawing duty arbitrage benefits by making components locally is difficult for companies—the Centre will need to fix this at the earliest. Doing this will be the only way for India to take its gross domestic value generation beyond 15%, and this will also allow India to capture larger parts of the global value chain with comprehensive, five-year measures,” Kunkolienker said.
He said that two key elements remain missing from India’s pitch to become a mature electronics economy. “At present, India’s best port is akin to the worst available port in China—as a result of this disparity, the largest ships have to dock at Colombo, and ship containers to India in smaller vessels. There is a sizeable amount of shipping margin that is lost in this—which can be recovered and generated if India has its own large ports. Further, it is important for India’s push to be a developed economy to showcase more than a single-digit count of metropolitan cities. Hubs such as Pune and Mysuru have tremendous development potential to come up as the next metropolitans with all amenities and infrastructure—we must come up with a scheme to invest in such a programme over the next five years,” he said.
Proposals for new ports and metropolitan hubs, in which boosting electronics sales and distribution plays a key role, have been submitted to the finance ministry ahead of the FY26 budget, Kunkolienker confirmed.
Chandak said that a proposal has also been submitted to set up export-based incentive targets to further boost local manufacturing and increase the capacity of the EMS sector in the country.
“The proposals have suggested a step-wise incentive scheme depending on the annual turnover of a company’s operation. These incentives could range from 1% to 4% of a company’s export margin, which would substantially boost operating cash flow for firms—while drawing more business to India,” he said.
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