Commenting on the overall Budget, Vice-President Neil Shah said, “This Budget accelerates the ‘Make in India’ initiative into its next phase by expanding the depth and breadth of the domestic supply chain. The focus on localizing everything from display modules to passive components is what’s needed to move the needle on value addition. Strengthening this core component base is imperative to drive the broader electronics ecosystem and move India beyond smartphones to high-growth sectors like AI servers, robotics and PCs. Addressing the current lack of a Tier-1 ecosystem for multi-layer PCBs, advanced sensors, passives, motors and others is critical to the success of the expanded outlay.”

Focus on developing electronics base

Introduction of India Semiconductor Mission 2.0: One of the most important announcements in the Budget relates to the second phase of the India Semiconductor Mission (ISM). While the first phase focused on creating fabs and packaging capacity, the second phase aims to localise upstream layers of the semiconductor value chain, including equipment, specialty materials and indigenous intellectual property. Senior Analyst Ashwath Rao said, “Doubling of the outlay for Electronics Component Manufacturing Scheme (ECMS) to INR 400 billion, combined with the expansion of ISM 2.0, will help India transition from an assembly-led electronics model to a full-stack semiconductor ecosystem. In the near term, we expect EMS, OSAT and component manufacturers to see the fastest revenue acceleration as incentives scale. Over the medium term, materials and equipment suppliers should benefit from recurring demand streams. In the longer term, the most meaningful value creation will likely emerge from indigenous design and IP development, which offers higher margins and export potential.”

Expansion of ECMS: Alongside the semiconductor push, another critical program supporting the broader electronics manufacturing ecosystem is the Electronics Component Manufacturing Scheme (ECMS). Launched last year, the scheme was met with strong enthusiasm from the industry, with investment commitments exceeding initial expectations more than twofold. To accommodate this momentum, the Budget has expanded the ECMS outlay to INR 400 billion. Senior Analyst Prachir Singh said, “This expansion is significant for building a strong domestic base across electronic segments. While India’s import bill for electronics intermediates continues to grow alongside exports, the enhanced outlay sends a clear signal to component makers that the government is willing to accommodate commitments made by the industry. Over time, this will help reduce the import bill, enable structural changes across the electronics industry, and significantly increase domestic value addition.”

A beginning for exploration of rare earth minerals and 3 dedicated chemical parks: To support the electronics industry and address evolving geopolitical trade dynamics, the Budget also announced plans to establish rare earth corridors for exploration and mining of critical minerals such as beryllium, graphite, indium, lithium, niobium, rhenium and tantalum. These minerals are essential inputs for several electronic components. Along with the announcement to establish three dedicated chemical parks, this could become increasingly relevant in ensuring long-term supply chain resilience.

Critical boost for contract manufacturing in electronics: Another important budget announcement to support the electronics industry was in the form of an exemption granted to foreign companies supplying capital goods and equipment to contract manufacturers of electronics products. This measure is particularly significant for companies such as Apple, which retain strong control over their manufacturing processes and often prefer to provide key capital equipment themselves. This exemption not only ensures that such investments are not taxed for global brands, but it also eases the capital burden on contract manufacturers such as Foxconn and Tata, who would otherwise need to commit large investments toward machinery and equipment. Research Director Tarun Pathak said, “This initiative is a catalyst for export growth in the EMS segment. It effectively mitigates two major pain points – margin pressure and capital constraints for equipment, thereby closing the competitiveness gap between local operations and global operations.”

One-time provision for SEZ units to sell goods in domestic market at concessional rates: Another measure that could potentially benefit the Indian market amid today’s uncertain global trade environment is the special one-time provision allowing eligible manufacturing units in SEZs to sell goods in the domestic market at concessional rates. If extended to electronics manufacturing units, this could help cushion some of the price pressures arising from the ongoing memory supply crunch.

Getting India’s AI and data ambitions on track through fiscal clarity

While many of the announcements were manufacturing-focused, the Budget also underscored India’s ambitions in digital infrastructure, particularly data centers. As India’s digital transformation accelerates, demand for scalable and sustainable data center capacity is growing rapidly. Given the capital-intensive nature of data centers, India is well-positioned to emerge as a key destination for hyperscalers expanding across the APAC and MEA regions. Senior Analyst Parv Sharma said, “This Budget strengthens India’s position as a global digital warehouse. The government has delivered on industry demands through safe-harbour provisions that eliminate transfer pricing disputes, historically among the most complex and long-running tax cases. With an automated, rule-driven system, the tax process is now seamless, reducing subjectivity, red tape and processing time. Overall, the shift from discretionary to rule-based taxation improves ease of doing business and allows the IT sector to focus on global technological leadership rather than litigation.” These measures also provide long-term planning clarity for hyperscalers, while the reseller framework supports tax sovereignty. With the rapid rise of AI workloads and increasing regulatory requirements around data localisation, demand for domestic data center capacity has already begun to outpace supply.

Something for the home

The only home appliance-specific announcement in the Budget was the reduction in basic customs duty on microwave oven components. While this could help lower costs, the exact components covered remain unclear. If the magnetron, the costliest and largely imported component, benefits from the duty reduction, consumer prices could see a meaningful decline. Separately, the reduction in import duties on goods for personal use from 20% to 10% may ease costs for premium products brought in individually, though it is unlikely to have a broader impact on appliance pricing.

While the Budget leaves room for improvement, particularly in addressing duty inversions for certain components, its emphasis this year is clearly long-term and structural. Some of these gaps may be addressed in future Budgets. Overall, the latest Budget alleviates several long-standing structural concerns and is likely to support sustained growth in India’s electronics manufacturing sector.