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Ministry of Electronics and Information Technology (MeitY) | India Semiconductor Mission (ISM) | NITI Aayog
During the Union Budget 2026-27 presentation on February 1, 2026, Finance Minister Nirmala Sitharaman announced the launch of India Semiconductor Mission (ISM) 2.0. This second iteration marks a strategic pivot from the “fab-centric” focus of Phase 1 (ISM 1.0) to a comprehensive value-chain approach. While ISM 1.0 successfully established the foundation by clearing 10 major projects worth ₹1.6 lakh crore, ISM 2.0 is designed to produce semiconductor equipment and materials, design full-stack Indian IP, and fortify global supply-chain resilience.
Key Pillars and Financial Outlay The mission targets critical gaps in the domestic ecosystem through several high-impact interventions:
Ecosystem Expansion: Focus on the production of specialty chemicals, gases, and capital equipment (machines that make chips), which are currently heavily imported.
Research and Workforce: Establishment of industry-led research and training centers to develop indigenous technology and create a high-tech workforce.
Incentive Boosting: The Electronics Components Manufacturing Scheme (ECMS), which saw overwhelming demand since its April 2025 launch, has had its outlay nearly doubled to ₹40,000 crore to capitalize on investment momentum.
Budgetary Support: For the 2026-27 fiscal year, an initial provision of ₹1,000 crore has been made for ISM 2.0, while the Modified Semiconductor and Display Manufacturing Programme allocation has increased to ₹8,000 crore.
IT Sector and Safe Harbour Reforms To complement the hardware push, the Budget proposes new “safe harbour” provisions for the IT/ITeS sector. A common safe harbour margin of 15.5% will now apply to a unified category of “Information Technology Services,” with the threshold for availing this facility raised from ₹300 crore to ₹2,000 crore. This rule-driven process will be automated, removing the need for manual examination by tax officers and providing much-needed tax certainty for global service hubs.
What is the “Full-Stack Indian IP” objective under ISM 2.0? “Full-stack Indian IP” refers to the development of indigenous intellectual property across the entire semiconductor design and manufacturing process. This means moving beyond just assembling or packaging global designs to owning the “blueprints”—including circuit layouts, system-on-chips (SoCs), and core architectures—that define the chip’s functionality. Owning this IP is critical for India’s strategic autonomy, as it reduces licensing costs and protects domestic applications in sensitive sectors like defense and aerospace.
Policy Relevance
ISM 2.0 represents a hardening of India’s technology sovereignty and industrial capability.
Upstream Supply Chain Resilience: By targeting the “machines that make chips” and specialty materials, the policy addresses the most significant structural friction in the global chip race—dependence on a few global suppliers for raw inputs.
Deep-Tech Recognition: The announcement of “Deep Tech Awards” in 2026 signals a broader governmental intent to recognize and reward breakthrough innovation in semiconductors and AI beyond simple production targets.
Attracting Global Cloud Players: The proposed tax holiday until 2047 for foreign companies providing cloud services via Indian data centers complements the semiconductor push by ensuring a domestic market for high-performance computing hardware.
Shift to Industrial Strategy: Experts note that ISM 2.0 moves India from a “subsidy-led” program to a “long-term industrial strategy,” anchoring entire ecosystems including design tools, R&D, and logistics within the country.
Relevant Question for Policy Stakeholders: How can MeitY ensure that the “industry-led research centers” under ISM 2.0 specifically prioritize 3-nanometre and 2-nanometre technology roadmaps to keep India competitive with global leaders by 2030?
Follow the full news here: Budget 2026-27 announces the launch of India Semiconductor Mission (ISM) 2.0