The Announcement
On July 15, 2026, the Union Cabinet cleared two manufacturing programmes with a combined outlay of nearly ₹1.9 lakh crore (~$22 billion): the ₹1,27,500 crore Semicon 2.0 scheme and the ₹62,500 crore Mobile Phone Manufacturing Scheme (MPMS) (Business Standard; PIB — Semicon 2.0). Semicon 2.0 builds on the first phase of the India Semiconductor Mission (ISM 1.0) and spans six pillars — chip design, equipment and materials, fabrication, advanced packaging and testing, R&D, and talent development. MPMS replaces the Production Linked Incentive (PLI) scheme for large-scale electronics, which lapsed on March 31, 2026, with a five-year window (FY2026-27 to FY2030-31) offering incentives of 2.25%–5% on eligible sales, plus up to 1.5% more for domestic component sourcing and 3% for design and R&D (MediaNama; PIB — MPMS).
The Case for Doing This
The steelman is straightforward and worth taking seriously. Global chip supply chains are concentrating around a handful of geographies exposed to Taiwan Strait risk; every large economy — the US (CHIPS Act), the EU (Chips Act), Japan and South Korea — is subsidizing fabs and packaging capacity, so unilateral restraint by India simply cedes the race rather than avoiding it. India's ISM 1.0 has already produced tangible plant, not just paper: twelve manufacturing units with over ₹1.64 lakh crore in committed investment, including Micron's Sanand facility and new fabs from Kaynes and CG Semi, with three now in commercial production (ThePrint). On phones, the sunset PLI scheme helped make India the world's second-largest mobile manufacturer, and MPMS's design-and-R&D incentive is a deliberate pivot away from pure assembly. Neither of these arguments is trivial, and a magazine committed to evidence-based policy should not dismiss industrial policy reflexively just because it is industrial policy.
The Question the First Round Left Unanswered
But the honest problem with this announcement is not that subsidies are inherently wrong — it's that Delhi is doubling down before showing its work. No consolidated public evaluation of ISM 1.0's actual outcomes — jobs created, import substitution achieved, private capital genuinely at risk versus government-guaranteed — was released before Semicon 2.0 was cleared. That matters because the record on the analogous mobile-phone PLI is not clean. Former RBI Governor Raghuram Rajan's critique of that scheme remains the sharpest articulation of the risk: because the incentive attached to finishing a phone in India rather than to a minimum domestic value-added threshold, firms could "import all the parts and assemble and still get all the benefits of the scheme" (Business Today). Disbursement data bore this out: by early 2024 only a small fraction of the mobile PLI's outlay had actually been paid out relative to targets, even as headline production numbers were cited as proof of success. MPMS's new component-sourcing and R&D kickers are a direct, sensible response to that exact critique — which is precisely why the absence of a published ISM 1.0 audit before its semiconductor sequel is a missed opportunity, not merely a paperwork lapse.
Semicon 2.0's Real Test Is Ecosystem Depth, Not Headline Capital
Semiconductor manufacturing is not a sector where committing capital to fabs alone buys competitiveness; it depends on process learning, specialty gas and materials supply chains, equipment servicing, and a skilled workforce that India is still building from a thin base. The government's own framing of Semicon 2.0 as covering the "entire value chain" — including incentives for the mineral and gas inputs that feed fabrication — reflects an implicit acknowledgment that ISM 1.0's fab-first approach understated how much of the value chain sits outside the fab gates. The government projects Semicon 2.0 will mobilize roughly ₹4 lakh crore in investment and ₹2 lakh crore in production over the scheme period; MPMS projects cumulative mobile production near ₹39 lakh crore and about 60,000 direct jobs by March 2031 (MediaNama; PIB — MPMS). Those are the numbers to hold the government to — not the announcement-day outlay figure, which measures fiscal commitment, not economic return.
What Would Make This Different From Round One
The policy design in MPMS — tying incentives to component sourcing and R&D rather than pure assembly volume — is the correct lesson from the Rajan critique, and credit is due for incorporating it. What's still missing is transparency: a standing, independently audited scorecard published annually against the specific targets Delhi has now set (60,000 jobs, ₹39 lakh crore production, ₹2 lakh crore in chip output), rather than aggregate investment-committed figures that conflate government-guaranteed capital with genuinely at-risk private spending. Parliament's own economic affairs oversight, through mechanisms tracked by PRS Legislative Research, would be the natural venue to demand that scorecard before a Semicon 3.0 is ever tabled.
Bottom Line
India is right to want fab capacity and a stronger phone-export base, and this package's design improvements over PLI 1.0 are real. But ₹1.9 lakh crore in fresh commitments, layered on an unaudited predecessor, asks taxpayers to trust that this round will convert capital into capability — without yet showing the data that would let anyone check.