In a clear push to turn the country into a major player in global electronics production, the central government has almost doubled funding for the Electronics Components Manufacturing Scheme (ECMS), raising it from Rs 22,000 crore to Rs 40,000 crore in the Union Budget 2026-27. The hike underscores the broader strategy laid out in the Budget, which puts artificial intelligence (AI), stronger digital backbone and semiconductor production right at the centre of the Narendra Modi government’s ‘Viksit Bharat’ (Developed India) ambition.
Electronics and IT Minister Ashwini Vaishnaw set the tone for this tech-driven approach, saying the government is focused on “building full-stack capabilities so that India becomes a global producer of technology, not just a consumer”. His remark points to a deliberate move away from relying mainly on services toward a model built around homegrown innovation and manufacturing.
A major step in that direction comes with new incentives for AI and cloud data centres. The Budget offers foreign companies a tax holiday extending to 2047 if they provide AI and Cloud services from India to international clients. The aim is to draw big global investments and establish the country as a go-to location for data operations. To add more certainty for businesses, a new safe harbour rule sets a 15 per cent margin on costs for related-party services.
The measure aligns closely with the prime minister’s earlier remarks at an international tech event, where he said: “The day is not far when the world will say — Designed in India, Made in India, Trusted by the World.”
That same ambition now takes a solid shape through the budget’s strong emphasis on AI, data centres and chip-making.
Industry voices suggest these steps will speed up AI use in areas like banking, finance and government services. Kishan Sundar, SVP and Chief Technology Officer at Maveric Systems, called the emphasis on AI and digital infrastructure “timely and necessary”, noting that “technology is becoming essential for sustainable growth and resilience”.
Another big announcement is the rollout of the India Semiconductor Mission (ISM) 2.0, backed by Rs 1,000 crore for the financial year starting April 1.
This next phase moves beyond just setting up basic production to focus on deeper strengths in chip design, equipment, materials, and building a skilled workforce over the long term.
On the tax and regulatory side, the government has streamlined the safe harbour provisions for IT services by grouping all IT and IT-enabled services under one category with a consistent 15.5 per cent margin. It has also increased the eligibility limit from Rs 300 crore to Rs 2,000 crore, which should make compliance simpler and offer greater predictability for major exporters.
Developing people’s skills forms a crucial part of the Viksit Bharat plan. The Capacity Building AI Missions target training for nearly 25 crore individuals, while backing continues for the National Quantum Mission, Anusandhan Research Fund, and efforts to finance innovation.
The government has further introduced a Rs 10,000 crore MSME Growth Fund and renewed attention on urban centres as drivers of progress, where applied AI is set to take on a bigger role in public services, manufacturing, and administration.
That said, several experts stress that success will hinge on effective rollout.
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