Overview
The Union Cabinet on 15 July 2026 cleared the second phase of the ISM and the MPMS. The new outlays are ₹1.27 lakh crore for ISM and ₹62,500 crore for MPMS. The aim is to attract ₹4 lakh crore of investment, generate ₹2 lakh crore in production and achieve ₹1 lakh crore in exports over the next five years.
Key Developments (Phase‑2)
- Expanded scope to cover chip design talent, capital machinery, semiconductor‑grade chemicals and R&D.
- Capital subsidy reduced to 30‑40% from the earlier 50% ceiling.
- Land support largely shifted to State governments, which are offering land at token prices.
- Incentives for mobile‑phone assembly range from 2.25% to 5% based on the extent of indigenous design.
Important Facts from Phase‑1
Phase‑1, approved in December 2021 with a ₹76,000 crore outlay, sanctioned 12 manufacturing and packaging units worth ₹1.64 lakh crore. Nine are semiconductor‑packaging units spread across Gujarat, Uttar Pradesh, Punjab, Assam, Odisha and Andhra Pradesh. One silicon‑fabrication unit and a gallium‑nitride micro‑LED display unit are also included. The Tata Electronics fab is slated for commercial production in 2028.
The design‑linked incentive programme approved 24 projects and provided free licences for expensive semiconductor design software to universities and start‑ups. The revamped Semiconductor Lab, Mohali will assist in chip “tape‑out”.
Why Focus on Semiconductors?
Supply‑chain shocks during the COVID‑19 pandemic and U.S. export controls on China highlighted India’s dependence on imported chips. Building a domestic semiconductor ecosystem is seen as essential for strategic autonomy and for integrating India into global electronics value chains. While the current facilities target 28 nm “legacy” chips, the government hopes to move towards frontier nodes as domestic IP and R&D improve.
Exam Relevance
Understanding the ISM and MPMS is vital for GS‑3 (Economy) questions on industrial policy, technology self‑reliance, and export promotion. The role of the Union Cabinet and the MeitY illustrates inter‑governmental coordination, a typical GS‑2 topic. The shift from high capital subsidy to lower rates reflects fiscal prudence, relevant for budgeting and public finance discussions.
Way Forward
For the ecosystem to reach frontier nodes, India must:
- Strengthen R&D and protect domestic IP in chip design.
- Ensure steady supply of semiconductor‑grade chemicals and gases.
- Encourage private‑sector participation through transparent procurement and land policies.
- Link phone‑assembly incentives to genuine indigenous design to build a complete value chain.
Successful implementation will reduce import dependence, boost exports and create high‑skill jobs, aligning with the government’s “Make in India” vision.