Union Budget 2026-27: India’s Industrial Leap Toward a Global EV & Semiconductor Hub

How Rare Earth Corridors and ISM 2.0 are Driving India’s Goal for a Self Reliant EV Supply Chain

Priya02-Feb-26 01:17 PM

Union Budget 2026-27: India’s Industrial Leap Toward a Global EV & Semiconductor Hub

The Union Budget 2026-27, presented by Finance Minister Smt. Nirmala Sitharaman, has unveiled a comprehensive roadmap to transform India into a global manufacturing powerhouse. By prioritizing supply chain resilience, critical mineral security, and advanced technology, the budget signals a transition toward the Viksit Bharat 2047 vision.

Industry leaders across the automotive, EV, and tech ecosystems have lauded the budget's focus on Rare Earth Corridors, India Semiconductor Mission (ISM) 2.0, and sustained capital expenditure.

1. Rare Earth Corridors: Breaking Global Dependencies

The government is establishing Dedicated Rare Earth Corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. This initiative aims to secure the domestic supply of materials required for Rare Earth Permanent Magnets (REPM), which are essential for EV motors and electronics.

“This is a positive development towards deepening India's domestic capacity and weaning away global dependence on China,” says Mr. Vikas Singh, MD , Greaves Electric Mobility.

Mr. Balbir Singh Dhillon, Brand Director of Audi India, added, “These corridors signal a clear intent to build resilient domestic supply chains that will support the future of automotive and electric mobility.”

2. ISM 2.0 & Electronics: Powering the Smart Mobility Revolution

With an increased outlay of ₹40,000 crore for electronics component manufacturing and the launch of ISM 2.0, the budget addresses the growing need for semiconductors in EVs.

ISM 2.0: Focuses on domestic equipment production, material manufacturing, and Indian owned Intellectual Property (IP).
Supply Chain Stability: Ms. Madhumita Agrawal, Founder & CEO , Oben Electric, noted that these measures are particularly relevant for manufacturers with end-to-end, in-house development.
Localization: Mr. Piyush Arora, MD & CEO of Škoda Auto Volkswagen India, welcomed the policy stability, stating it reinforces India's role as a "key automotive manufacturing and export base."

3. Battery Storage & EV Rentals: Driving Mass Adoption

A major highlight is the extension of customs duty exemptions on capital goods for lithium-ion cell manufacturing, now including equipment for Battery Energy Storage Systems (BESS).

“This significantly lowers cost barriers and accelerates fleet-scale electrification,” says Mr. Shivam Sisodiya, CEO & Co-Founder of Bijliride. “The addition of electric buses to public transport creates strong momentum for shared, rental, and technology-led EV solutions.”

Mr. Harinder Singh, MD & CEO of Yokohama India, emphasized that the ₹12.2 lakh crore infrastructure outlay and expanded freight corridors will improve "last-mile connectivity" and logistics efficiency for the entire sector.

Industry Reaction Summary: A Multi-Dimensional Boost

Focus Area	Key Policy Measure	Industry Perspective
Manufacturing	₹12.2 Lakh Cr Capex	Enhances manufacturing competitiveness (Škoda VW).
EV Ecosystem	Rare Earth Corridors	Secures motor components and self-reliance (Greaves).
Technology	ISM 2.0 & ECMS Outlay	Builds domestic IP and chip supply chain (Audi India).
Safety & Reform	TDS/Income Tax Exemption	Pragmatic, victim-centric road safety reform (Vega Helmets).
MSMEs	₹10,000 Cr SME Fund	Empowers smaller firms to innovate and scale (Zelio).

4. Road Safety & Victim-Centric Reforms

In a unique move, the budget exempted TDS and income tax on MACT (Motor Accident Claims Tribunal) interest awards.

Mr. Dilip Chandak, MD of Vega Helmets, praised this as a "victim-centric reform" that ensures full payouts reach families faster. He noted that pairing this with MSME boosts could "slash accidents by thousands yearly" by promoting higher safety compliance.

Conclusion: A Stable Pathway to 2047