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Budget 2024: FM proposes 71% increase in outlay for chip, electronics manufacturing

The government is gearing up for a major expansion in chip and electronics manufacturing, with an aim to transform the country into a global hub.To achieve this, the interim budget for FY25 proposed a 71.4% increase in allocation for both sectors to Rs 13,104.50 crore. The allocation for cyber security projects also received a sharp boost to Rs 759 crore in the interim budget from Rs 400 crore in the previous budget. The allocation of compound and chip assembly has increased by 133% to Rs 4,203 crore.

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Overall, the allocation under the Ministry of Electronics and Information Technology (MeitY) for central sector schemes and projects including Digital India programmes rose by almost 40% to Rs 17,319.51 crore.There is “clarity in policy and increase of trust in India,” union electronics and information technology minister Ashwini Vaishnaw said, responding to a question from ET. ” Companies want to set up mega-manufacturing clusters in India. People have huge confidence in India, and we will see more announcements very soon,” he said.

The higher allocation signifies that the government may be factoring in several applications for incentives this fiscal in chip and electronics manufacturing.

Several large companies have committed investments in India’s fledgling semiconductor assembly and testing space following intense government efforts to develop a robust chip and manufacturing ecosystem locally.

“If one were to read the tea leaves in the cup, the message is clear that the economy has never been healthier than it is today. The expansion that will happen from here will be on the back of technology. The message from the interim budget is that startups, innovation and research will have funding that they need,” the union minister of state for electronics and information technology Rajeev Chandrasekhar told ET.

Last September, US-based Micron Technology started building its semiconductor assembly plant at Sanand in Gujarat with a total investment of $2.75 billion. While HCL and Foxconn announced in January that they would partner for an OSAT (outsourced semiconductor assembly and testing) facility, Murugappa group and Kaynes Technology also have plans for chip assembly.

Finance minister Nirmala Sitharaman also proposed an allocation of Rs 900 crore to modernise a government-run semiconductor lab in Mohali. ET reported on January 31 that the government had received 9 bids including from the Tata Group and Tower Semiconductor for the overhaul of the 48-year-old semiconductor chip fabrication unit.

For production-linked incentive (PLI) schemes, which include incentives for largescale electronics manufacturing and IT hardware, the minister has proposed a 33.4% increase in the allocation for FY25 at Rs 6200 crore.

Anil Valluri, MD and VP, India and SAARC, Palo Alto Networks said the doubling of allocation for cybersecurity projects is very inspiring. “The sheer scale and speed of India’s digitisation will open new avenues for potential threats – as seen by the recent cyberattacks on critical industries including healthcare, finance, and aviation.” As India strives for global leadership in the digital space, securing its digital assets will be paramount, he added.

The budgetary allocation under the modified scheme for establishing semiconductor fabrication units has also been increased by 50% to Rs 1,500 crore, while that for setting up display fabs has been boosted to Rs 100 crore.

The largest share of funds allocated in the budget will be given as PLI incentives to large-scale electronics manufacturing, encompassing both mobile phone components and other specified electronics components.

India’s semiconductor ambitions got a boost from the government’s massive $10 billion subsidy, which was to be used for setting up a semiconductor manufacturing infrastructure, including a wafer fabrication unit.

Even in the electronics manufacturing space, India has been aggressive in its push to promote the nation as an alternative destination to China. Apple, for instance, has been doubling down on its India presence in a bid to diversify out of China.

Recognising the potential of the sector, the government brought out a PLI scheme for IT hardware, which proposed a financial incentive to boost domestic manufacturing and attract large investments in the value chain.


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