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Budget 2025 expectations from the Indian semiconductor industry

There have been many proposals in the past, but few of them have actually been implemented. Will we see any change for India's semiconductor industry in 2025? Remains to be seen!

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Here are some recommendations from India's semiconductor industry for the upcoming budget 2025.

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Dr Ajai Chowdhry, Founder HCL, Chairman EPIC Foundation & MGB, National Quantum Mission of India.

We must prioritize the startup ecosystem in the forthcoming budget. The startup scene in India is currently the third biggest in the world, and the country is also one of the fastest-growing tech hubs. The government has played and continues to play a crucial role in creating an enabling environment for the start up ecosystem to thrive. 

The removal of the angel tax was a welcome move by the Government and was celebrated by the startup community. However there is more that needs to be addressed. One example is the present tax system, which hinders the use of employee stock option plans (ESOPs), which are crucial for startups to recruit and retain talent. 

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Whatever the situation may be, employees are still obligated to pay taxes when they exercise their options. It would be more equitable to tax ESOPs only when the shares are sold, in line with the employee's financial means to pay the tax. With the right policies and continued entrepreneurial spirit start-ups can play pivot in creating a Product Nation and ensure Strategic Autonomy.

Ashok Chandak, President of IESA. 

Here are India Electronics and Semiconductor Association (IESA) recommendations for India's union budget 2025-26: 

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To support India’s ambition of becoming a global hub for electronics and semiconductor design and manufacturing, the following proposals are suggested:

Semiconductors manufacturing: Expansion of the PLI scheme.
Enhanced allocation: Extend the production-linked incentive (PLI) scheme beyond the current allocation of ₹76,000 crore (~$10 billion) with an additional provision of $20 billion over the next five years.

Rationale
* India’s semiconductor sector is at a pivotal growth stage, driven by government initiatives, strategic collaborations, and a robust domestic market.
* Indian companies and IESA members, have committed to projects worth over $20 billion.
* The Semicon India Program and ISM have delivered significant contributions to GDP growth, job creation, foreign investments, industrial self-reliance, and bolstering India’s position in the global semiconductor market.

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Proposal: Allocate $20 billion in the upcoming budget to propel the next phase of growth, innovations, and Atmanirbhar Bharat with global impact.

Enhancing electronics value addition
* India’s electronics manufacturing can reach $500 billion by 2030-32 from $150 billion of this year.
* Current local value addition stands at less than 18%. Increasing this to 40% will create extensive job opportunities and retain significant economic value domestically.

Proposal
* Introduce additional PLI outlays linked to local value addition strictly.  PLI to be paid for minimum 25% in 2025-26 and 30 % by 2027.
* Focus particularly on mobile phone segment, which represents the largest opportunity. Enforce stricter value addition norms as a prerequisite for availing PLI benefits.
* Provide $5 billion of Incentives for electronics components industry for companies and JVs having majority holding/stake of Indian corporates/ entrepreneurs.

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Product creation and R&D
Long-term sustainability: For the electronics and semiconductor industry to thrive sustainably, fostering product creation and intellectual property (IPR) development through dedicated R&D is critical.

Proposal
* Allocate ₹10,000 crore for targeted R&D initiatives in ESDM sector on PPP model, separate from generic funding, and not just the funding to academic institutes but to boost Industry collaborated R&D.
* Consolidate multiple schemes under a unified Product Creation Initiative to high priority products of India needs with global potential to maximize impact.

Export incentives
* Boosting global competitiveness: To position India as a leading exporter of electronics and semiconductors, targeted export incentives are necessary.

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Proposal
* Introduce 2%  additional incentives and tax benefits for exports of semiconductor and electronics products that meet value addition norms, particularly in high-demand categories. 
* Simplify export procedures and provide logistical support for global market access.
* Establish dedicated trade agreements to secure markets for Indian electronics and semiconductor products, ensuring steady growth in export revenue.

These measures will accelerate India's transformation into a leading electronics and semiconductor hub, fostering innovation, creating jobs, driving economic self-reliance, and expanding India's presence in global markets.

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