Budget 2025: Significant Increases in Semiconductor and Mobile Phone Production Incentives
In the Union Budget 2025, Finance Minister Nirmala Sitharaman has proposed substantial allocations to bolster India’s semiconductor and mobile phone manufacturing sectors. The budget for semiconductors has been increased by 83%, reaching ₹7,000 crore, while the Production-Linked Incentive (PLI) scheme for mobile phones has been enhanced by 55%, totaling ₹9,000 crore.
Historical Allocations and Adjustments
| Financial Year | Semiconductor & Display (₹ crore) | PLI for Electronics & Hardware (₹ crore) |
|---|---|---|
| 2023-24 | 1,503 | 4,560 |
| 2024-25 | 6,903 | 6,200 |
In the previous fiscal year (FY25), the allocation for semiconductors was reduced from ₹6,903 crore to ₹3,816 crore. This adjustment was primarily due to lower revised estimates for compound semiconductors, Advanced Technology Manufacturing Process (ATMP), and Outsourced Semiconductor Assembly and Test (OSAT), which decreased from ₹4,203 crore to ₹2,500 crore. For FY26, the budget has allocated ₹3,900 crore for these areas.
Similarly, the allocation for semiconductor fabs was decreased from ₹1,500 crore to ₹1,200 crore in FY25 but has been increased to ₹2,500 crore for FY26.
Mobile Phone Manufacturing: A Success Story
The smartphone sector has emerged as a notable success, leading to a new allocation of ₹8,885 crore for electronics PLI, reflecting a 55% increase compared to the revised estimate of ₹5,747 crore in FY25. This surge underscores the government’s commitment to enhancing domestic manufacturing capabilities.
Customs Duty Revisions to Promote ‘Make in India’
To further promote the ‘Make in India’ initiative, the government has proposed increasing the basic customs duty on interactive flat panel displays from 10% to 20% and reducing the duty on open cells and other components to 5%. Additionally, there is a proposal to exempt customs duty on the manufacturing of open cells for LCD and LED TVs. Previously, the customs duty was reduced from 5% to 2.5%.
Facilitating Foreign Participation in Electronics Manufacturing
The Finance Minister has also proposed an estimated taxation regime for non-residents providing services to resident companies establishing or operating electronics manufacturing facilities. This includes a safe harbor provision for non-residents storing components for supply to specified electronics manufacturing units, aiming to provide tax certainty and encourage foreign participation.
Strategic Initiatives to Position India as an Electronics Hub
The budget emphasizes three critical schemes to advance India’s aspirations as an electronics hub:
- Semiconductor Program: With an increased allocation, this program aims to strengthen the semiconductor manufacturing ecosystem in India.
- Production-Linked Incentive (PLI) Scheme for Electronics and IT Hardware Manufacturing: The enhanced budget for this scheme is designed to attract global manufacturers and boost domestic production.
- ‘Make in India’ Initiative: Through various policy measures, including customs duty adjustments, the government seeks to promote local manufacturing and reduce dependence on imports.
Prime Minister Narendra Modi has set an ambitious target for the industry, aiming for a $500 billion valuation by FY30. The significant budgetary allocations and policy measures in Budget 2025 reflect the government’s dedication to achieving this goal and establishing India as a global leader in electronics manufacturing.
