Finance Ministry Panel Clears a Rs 1.25 Lakh Crore Outlay for Semiconductor Mission 2.0

India's push to build a domestic chip industry just cleared a major internal hurdle. On 30 June 2026, the Expenditure Finance Committee (EFC) of the Union Finance Ministry approved a Rs 1.25 lakh crore outlay for the second phase of the India Semiconductor Mission, widely referred to as ISM 2.0. The proposal now goes to the Union Cabinet for final approval before it becomes policy.

A bigger, broader bet than ISM 1.0

The headline number is the story. At Rs 1.25 lakh crore, the cleared outlay is well above the roughly Rs 76,000 crore committed under the first phase of the India Semiconductor Mission. More than the size, though, it is the shape of the spending that signals a shift in thinking.

ISM 1.0 was, in practice, about landing anchor factories: getting fabs and packaging plants built on Indian soil with generous capital subsidies. Under the mission so far, 12 projects have been approved with a combined investment pipeline of about Rs 1.64 lakh crore, comprising one silicon fabrication unit, two compound-semiconductor fabs, and nine assembly, testing, marking and packaging (ATMP/OSAT) units.

ISM 2.0 is designed to fill in everything around those anchors. The expanded scheme is meant to support the wider ecosystem that a chip industry actually runs on: capital equipment, industrial gases, specialty chemicals and other materials, and the small and medium enterprises and ancillary suppliers that feed the fabs. It also leans further into design and intellectual property, the higher-margin, higher-sovereignty end of the value chain, rather than only subsidising manufacturing capacity.

Why the ecosystem focus matters

A fab is only as reliable as its supply chain. Photolithography tools, ultra-pure gases, photoresists and dozens of specialty chemicals are today overwhelmingly imported, which means even an Indian-made wafer is stitched together from foreign inputs. By directing a large share of the new outlay toward equipment, materials and MSME suppliers, ISM 2.0 is an attempt to reduce that dependence and capture more of the value, and more of the resilience, inside the country.

The design-and-IP emphasis matters for a similar reason. India already has a deep bench of chip-design talent and a growing roster of fabless startups; strengthening indigenous IP and design tooling is a comparatively capital-light way to move up the value chain while the far more expensive fabrication base matures.

What to watch next

The EFC clearance is a necessary step, not the finish line. The outlay still needs Cabinet approval, and the real test will be the fine print: how the money is split between manufacturing, materials, equipment and design; what incentive structures are offered; and whether the ecosystem and MSME components are funded generously enough to actually shift sourcing away from imports. If ISM 1.0 was about proving India could host fabs, ISM 2.0 is a wager that it can host the whole supply chain around them.

Sources

• The Pioneer: https://dailypioneer.com/news/finance-ministry-panel-clears-rs-1-25-lakh-cr-outlay-for-ism-2-0
• Republic World: https://www.republicworld.com/business/india-doubles-down-on-chips-rs-125-lakh-crore-cleared-for-semiconductor-mission-20-2026-06-30-130668
• StartupTalky: https://startuptalky.com/news/finance-ministry-panel-clears-inr-1-25-lakh-crore/
• Assam Tribune: https://assamtribune.com/business/centre-approves-rs-125-lakh-crore-for-semiconductor-mission-20-1613685