ISM 2.0 Announced in Budget 2026-27 — ₹76,000 Crore Becomes ₹1.25 Lakh Crore
Finance Minister Nirmala Sitharaman announced ISM 2.0 in the Union Budget for FY2026-27, expanding India's semiconductor mission beyond fabrication and packaging to include equipment manufacturing, speciality materials, semiconductor design IP, and industry-led R&D centres.
ISM 1.0, launched in December 2021 with a ₹76,000 crore budget, focused on attracting investments in semiconductor fabrication and ATMP/OSAT facilities. ISM 2.0 is a fundamentally broader programme — targeting the upstream supply chain that India currently imports entirely: chipmaking equipment, speciality chemicals, industrial gases, substrate materials, and semiconductor design IP. The Finance Ministry's Expenditure Finance Committee (EFC) subsequently cleared a ₹1.25 lakh crore proposal for ISM 2.0 — a 64% increase over ISM 1.0. Cabinet approval is pending but expected.
ISM 2.0 is also expected to modify incentive structures: the current 50% capex subsidy for ATMP/OSAT may shift toward support for equipment and materials rather than facility construction — encouraging domestic production of the consumables that every fab and packaging plant needs.
ISM 2.0 changes what's investable in Indian semiconductors. Under ISM 1.0, the opportunity was facility construction. Under ISM 2.0, the opportunity expands to equipment manufacturing, chemical supply, gas supply, and design IP — categories where Indian SMEs and mid-size manufacturers can participate, not just large conglomerates. For institutions, ISM 2.0's emphasis on industry-led R&D centres and training is a direct funding signal for semiconductor education programmes aligned with the mission.