India is now preparing to significantly upscale its push into the global semiconductor supply chain through the formulation of a new $20 billion incentive package, a move that underscores both the urgency and the ambition with which New Delhi is approaching the chip race.

The proposal, initiated by the Ministry of Electronics and Information Technology (MeitY), has been forwarded to the finance ministry for clearance, with a Cabinet decision anticipated by the end of 2025.

This timeline is deliberately aligned with the conclusion of the first phase of the India Semiconductor Mission (ISM), which was designed to establish a foundational ecosystem for semiconductor manufacturing and design in the country.

The new incentive scheme would therefore serve as the critical bridge between the outcomes of the first phase and the roadmap for deeper integration into global value chains in the next decade.

MeitY’s current work involves preparing a comprehensive evaluation of ISM’s initial results, such as the level of domestic and international interest generated, the approvals and construction progress of fabrication units, assembly and test facilities, and the expansion of chip design capabilities.

This assessment will also be benchmarked against global semiconductor incentive regimes, especially the U.S. Chips Act, which has mobilized over $52 billion in support, and the European Union’s €43 billion initiative combining public and private capital allocations.

India is aware that countries such as South Korea, Japan, and China are not only offering financial grants but also a suite of fiscal instruments, including tax concessions, low-cost financing, and expedited regulatory clearances.

The global comparison highlights the fact that while India’s financial commitment will remain modest relative to richer economies, the government intends to frame its offer around predictability, long-term regulatory assurance, and gradual fiscal scaling rather than one-time subsidies.

The finance ministry, in reviewing the new proposal, has asked for detailed projections of economic impact, including job creation, likely foreign direct investment inflows, technology transfer, and the multiplier effects on downstream industries such as electronics, automotive, telecommunications, and defence.

One of the critical challenges India faces is demonstrating that its initial investment schemes have generated measurable results in terms of committed fab construction and technological partnerships.

Officials are also conscious of the global momentum, as countries are racing to secure not only chip production capacity but also geopolitical leverage in an industry increasingly linked to national security and technological self-reliance.

India’s window to attract marquee semiconductor players is narrow, as once major firms anchor their capacity in other geographies, switching cost and strategic inertia make relocation unlikely.

The proposed $20 billion package, structured over multiple years, is being considered as a carefully sequenced mix of subsidies for fabrication units (fabs), incentives for ancillary facilities such as ATMP (Assembly, Testing, Marking, and Packaging), and grants for design innovation and research into next-generation nodes.

The scheme will likely extend reforms under ISM, including a “first-in-location” bonus for strategic investors who commit to building initial capacity inside India, alongside regulatory measures to simplify approvals.

Unlike its competitors, India faces the added challenge of building supply chain depth, encompassing speciality chemicals, silicon wafer manufacturing, and semiconductor-grade gases, areas where domestic capability is currently limited. Part of the scheme is therefore expected to earmark resources for building upstream raw material ecosystems and skilling initiatives to create a semiconductor-ready workforce.

At the geopolitical level, the proposed package signals India’s recognition that semiconductors are not merely an industrial growth opportunity but a pillar of strategic autonomy.

With the United States, European Union, and their allies deliberately seeking to diversify supply chains away from China, India sees a chance to position itself as a credible alternative partner in Asia, attracting anchor investments through a combination of market size, operational stability, and alignment with Western strategic objectives.

However, India also faces the delicate balancing act of reconciling its fiscal limitations with the deep subsidies offered by rivals. For example, Washington and Brussels have prioritized outright grant support and long-term purchase guarantees, whereas India must refine its package to maximize investor appeal while maintaining budgetary discipline.

The Cabinet’s final decision at the close of 2025 will thus be pivotal in shaping India’s semiconductor future. Should the $20 billion scheme be approved and effectively deployed, it would reinforce the country’s ability to anchor one or two leading fabs within its borders, stimulate domestic design start-ups, and catalyse private-sector investment in enabling infrastructure.

Conversely, an underwhelming package or bureaucratic delays could weaken India’s positioning in a technological domain where global capacity is already being locked down.

Policymakers are therefore treating this incentive scheme not just as financial support but as a second-phase strategic inflection point, one that will determine whether India becomes a meaningful participant in global chip supply chains or remains a marginal player in the shadow of larger subsidizing economies.

Agencies