Electronics and Semiconductor Push: Budget 2025-26 Sees 48% Hike in MeitY Allocation
The Indian government has significantly increased funding for the Ministry of Electronics and Information Technology (MeitY) in the Union Budget for FY26, with a 48.16% jump from ₹17,566.31 crore (RE FY25) to ₹26,026.25 crore. This boost is primarily aimed at strengthening electronics manufacturing and semiconductor production in the country. Key policy changes include an increase in basic customs duty (BCD) on Interactive Flat Panel Displays (IFPDs) from 10% to 20%, while reducing it on Open Cells for LCD/LED TVs and various mobile phone components to zero. The Production Linked Incentive (PLI) scheme, crucial for large-scale electronics manufacturing, saw a 55.8% increase in allocation to ₹9,000 crore, with IT hardware manufacturing receiving a nearly fourfold hike. Additionally, funding for semiconductor and display manufacturing has been ramped up by 83.4% to ₹7,000 crore, including more than doubling the budget for setting up semiconductor fabs to ₹2,499.96 crore.
For non-Indian companies, these changes signal a more attractive investment environment with a clearer cost structure. The rationalization of import duties on key inputs could make India a more competitive hub in the global electronics supply chain. Furthermore, the introduction of a presumptive taxation regime for non-resident service providers in the electronics manufacturing sector simplifies tax compliance, potentially encouraging more foreign players to participate in India’s growing tech ecosystem.
Editor’s Note: The Indian government’s Union Budget for FY26 allocates ₹26,026.25 crore to the Ministry of Electronics and Information Technology (MeitY), marking a 48% increase, with a focus on strengthening electronics manufacturing and semiconductor production. Key policy changes, such as a reduction in import duties on mobile phone components and the introduction of a presumptive taxation regime for non-resident service providers, offer a more attractive investment environment. These moves create a competitive landscape for foreign companies, especially from Taiwan, to invest in India’s expanding tech ecosystem.
India Unveils ₹10,000 Cr Fund of Funds, National GCC Framework to Boost Startups and Tech Sector
Finance Minister Nirmala Sitharaman has announced a new ₹10,000 crore Fund of Funds (FoF) with an expanded scope to support Indian startups, aiming to reduce reliance on foreign investments and accelerate research and development (R&D) in emerging sectors. The initiative builds on the 2016 FoF, which catalyzed ₹91,000 crore in venture capital commitments. A dedicated DeepTech FoF is also being explored to drive advancements in AI, quantum computing, and semiconductors. Industry leaders welcomed the move, noting that it will provide much-needed capital in a challenging funding environment. Additionally, the IndiaAI Mission received a ₹2,000 crore allocation this year, with plans to establish 20 AI curation units and 80 AI labs across higher education institutes.
In a major push to attract global companies, the government also announced a national framework to guide states in promoting Global Capability Centers (GCCs) in tier-II cities. With 80% of global firms yet to set up GCCs in India, the initiative aims to make India a leading hub for corporate innovation and skilled job creation. This move is expected to attract foreign firms looking to expand their operations while leveraging India’s growing talent pool and infrastructure. For non-Indian companies, these initiatives signal a more structured and investment-friendly environment, making India a key destination for deep-tech innovation and corporate expansion.
Editor’s Note: India has launched a ₹10,000 crore Fund of Funds (FoF) to support startups, reduce foreign investment reliance, and boost R&D in emerging sectors like AI and quantum computing, with a focus on DeepTech. The government has also allocated ₹2,000 crore for the IndiaAI Mission and plans to establish 20 AI curation units and 80 AI labs in higher education institutes. Additionally, a national framework to promote Global Capability Centers (GCCs) in tier-II cities aims to attract foreign companies, positioning India as a hub for innovation and skilled job creation.
Data Centre Market to Triple by 2032, Driven by Infrastructure and Digital Demand
India’s data centre market is set for rapid expansion, projected to grow from ₹38,984 crore (US$ 4.5 billion) in 2023 to ₹1,00,491 crore (US$ 11.6 billion) by 2032, as per the Economic Survey 2024-25. This growth, at an annual rate of 10.98%, is fueled by rising digital adoption, infrastructure development, and India’s cost advantages, including lower construction costs compared to markets like Australia, Japan, and Singapore. The country’s colocation data centre capacity reached 977 MW in 2023, marking a 105% YoY surge, with 1.03 GW under construction for 2024-28 and an additional 1.29 GW in the pipeline. Additionally, under the GI Cloud initiative (MeghRaj), 23 cloud service providers have been empanelled to support government digital infrastructure, with the National Informatics Centre currently hosting 1,917 applications.
For non-Indian companies, India’s growing data centre ecosystem presents significant opportunities for investment, expansion, and partnerships. Lower operational costs, a booming digital economy, and government-backed initiatives make the country an attractive destination for cloud service providers, hyperscale data centres, and global IT firms looking to establish a stronger presence in Asia. As India enhances its digital infrastructure, foreign companies can benefit from tapping into its fast-growing cloud and data management market.
Editor’s Note: India’s data centre market is projected to grow from ₹38,984 crore in 2023 to ₹1,00,491 crore by 2032, driven by rising digital adoption, infrastructure development, and cost advantages. The country’s colocation data centre capacity surged 105% in 2023, with additional capacity under construction to meet future demand. For foreign companies, India offers significant investment opportunities in cloud services and data centres, supported by government initiatives and a booming digital economy.
India to Develop Indigenous GPU, Launch AI Compute Facility Amid Global AI Race
India is set to develop its own Graphics Processing Unit (GPU) within the next three to five years, alongside a domestic large language model (LLM) under the ₹10,370 crore IndiaAI Mission, according to Union IT Minister Ashwini Vaishnaw. The move comes amid concerns over India’s AI competitiveness, especially after the rise of Chinese AI startup DeepSeek. The government has partnered with six developers to build an India-centric AI model tailored to local languages and cultural contexts. Additionally, the government has selected 18 AI-based applications in fields like agriculture and climate change for funding. To accelerate AI research, the government has procured 18,000 high-end GPUs, with 10,000 already available for rollout in the coming days.
For non-Indian companies, these initiatives signal India’s intent to establish itself as a key player in AI and semiconductor manufacturing, reducing dependence on foreign hardware. The launch of a common GPU compute facility, with access rates as low as ₹150 per hour and a 40% subsidy for end users, presents opportunities for global AI firms, cloud providers, and semiconductor manufacturers looking to collaborate or expand in India’s rapidly growing tech ecosystem. Additionally, the new presumptive taxation regime for non-residents in electronics manufacturing could incentivize foreign experts and companies to invest in India’s semiconductor and AI ambitions.
Editor’s Note: India plans to develop an indigenous GPU and large language model within the next three to five years as part of the ₹10,370 crore IndiaAI Mission, aimed at boosting AI competitiveness. The government has procured 18,000 high-end GPUs and partnered with six developers to create an AI model tailored to local languages and contexts. For foreign companies, these initiatives offer opportunities to collaborate on AI and semiconductor projects, with incentives like a low-cost GPU compute facility and a new taxation regime encouraging investment.
AI-Driven Semiconductor Demand to Reach 28% by 2026: Report
India’s semiconductor demand is projected to surge to 28% by the end of 2026, nearly matching the global demand of 29%, as per a report by the Capgemini Research Institute (CRI). The study highlights that 96% of Indian downstream firms foresee increased demand for AI chips and custom silicon chips, surpassing global expectations of 88% and 81%, respectively. Additionally, 82% of Indian companies anticipate higher demand for memory-intensive chips like HBM and GDDR6. Advancements in AI/ML acceleration (50%) and GPU computing (45%) are seen as the most crucial semiconductor innovations, while enhanced security, comprehensive APIs, and greater customization rank as top technology priorities.
The report suggests that India’s semiconductor ecosystem is evolving rapidly, with 54% of downstream organizations already utilizing custom silicon chips, close to the global average of 56%. This growing demand signals opportunities for international semiconductor firms to cater to the Indian market, particularly in AI-driven solutions. As 52% of Indian firms express confidence in the semiconductor industry’s ability to innovate at a pace that meets future needs, global companies could benefit from aligning their strategies with India’s fast-growing AI and semiconductor landscape.
Editor’s Note: India’s semiconductor demand is projected to reach 28% by 2026, driven by a surge in AI and custom silicon chip requirements. A report by Capgemini Research Institute reveals that 96% of Indian firms expect increased demand for AI chips, with advancements in AI/ML acceleration and GPU computing as key drivers. This presents significant opportunities for global semiconductor companies to invest in India’s rapidly evolving AI-driven market.
India Aims to Become Global Toy Manufacturing Hub with New Action Plan
India’s toy industry received a significant boost as Finance Minister Nirmala Sitharaman, in her Budget 2025 presentation, announced a national action plan to position the country as a global leader in toy manufacturing. The initiative includes setting up dedicated toy manufacturing clusters and promoting eco-friendly, sustainable toys under a recognized Indian brand, aligning with the ‘Make in India’ vision. Following the announcement, shares of Ok Play India rose by 2.10% to Rs 17, reflecting investor confidence in the government’s commitment to the sector. The initiative is expected to generate 22 lakh new jobs, reducing unemployment and expanding livelihood opportunities.
The plan also aims to enhance India’s export potential, with toy exports projected to surpass Rs 1.1 lakh crore, contributing over Rs 400 crore in revenue to the economy. For international companies, this move signals a growing market for toy-related investments, joint ventures, and supply chain collaborations in India. With dedicated clusters and skill development programs, global toy manufacturers and retailers may find new opportunities to partner with Indian producers and leverage the country’s expanding toy industry.
Editor’s Note: India aims to become a global leader in toy manufacturing with a new national action plan announced in the Budget 2025, focusing on sustainable, eco-friendly toys and the establishment of dedicated manufacturing clusters. The initiative is expected to create 22 lakh new jobs and boost toy exports, potentially exceeding ₹1.1 lakh crore. For international companies, this presents opportunities for investment, joint ventures, and collaborations with India’s growing toy sector.