ICEA on Budget 2026–27: Electronics push strong, structural gaps remain

The India Cellular and Electronics Association (ICEA) has said that the Union Budget 2026–27 adopts a steady and largely inclusive approach, reinforcing India’s manufacturing and technology ecosystem through policy continuity, scale, and targeted reforms. According to the industry body, the Budget builds on recent momentum in electronics manufacturing while providing long-term signals for investors across semiconductors, cloud infrastructure, and digital services.

ICEA highlighted the sustained policy focus on electronics manufacturing, the launch of India Semiconductor Mission (ISM) 2.0, and the significant expansion of the Electronics Component Manufacturing Scheme (ECMS) as strong indicators of the government’s commitment to building resilient domestic supply chains. These measures, the association said, will strengthen India’s integration into global value chains and reduce dependency on imports over time.

A key positive, according to ICEA, is the announcement of a tax holiday until 2047 for foreign companies offering global cloud services using India-based data centres. The association described this as a forward-looking step that provides long-term policy certainty, anchors global digital infrastructure within India, and enhances the country’s credibility as a trusted destination for data, cloud, and AI-led services. ICEA noted that such predictability is critical for attracting large-scale, long-horizon investments in digital infrastructure.

The association also welcomed complementary measures such as a five-year income tax exemption for foreign suppliers of capital equipment operating in bonded zones, the Safe Harbour framework for non-resident component warehousing, customs decriminalisation, and the extended validity of advance rulings. Together, these steps are expected to ease compliance burdens, improve ease of doing business, and strengthen investor confidence across the electronics and manufacturing ecosystem.

However, ICEA cautioned that several structural challenges remain unresolved. Inverted duty structures affecting capital equipment, display assemblies, inductors, flexible printed circuit assemblies (FPCA), microphones, receivers, speakers, and other specialised inputs continue to impact cost competitiveness. The association also pointed to partial progress on MOOWR reforms, limited clarity around tax-neutral vendor-managed inventory (VMI) models, and lingering uncertainty related to Permanent Establishment exposure for foreign-owned capital equipment as constraints to faster scale-up.

Commenting on the Budget, Pankaj Mohindroo, Chairman, ICEA, said:
“Budget 2026–27 reinforces the government’s commitment to manufacturing-led growth, particularly in electronics and semiconductors, through continuity, scale, and targeted reforms. Measures such as the expansion of ECMS, support for ISM 2.0, and long-term incentives for cloud and data infrastructure send a strong signal of strategic intent and policy stability. At the same time, key structural issues, especially inverted duty structures, unfinished MOOWR reforms, and tax-related uncertainties, need timely resolution to ensure cost competitiveness and speed of execution.”

Mohindroo added that the rapid growth of mobile manufacturing demonstrates what consistent and bold policy measures can achieve. To replicate this success across other segments and move manufacturing towards a 25% share of GDP, he said, the proposed National Manufacturing Mission is critical to enabling the ecosystem to scale effectively.

ICEA reiterated its commitment to working closely with the government and industry stakeholders to support policy implementation and accelerate India’s progress towards becoming a globally competitive electronics manufacturing hub.