As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026–27 on February 1, the consumer electronics industry—particularly the smartphone segment—is closely watching for policy signals. With handset prices under pressure due to global supply constraints and rising input costs, both consumers and manufacturers are looking to the Budget for relief and long-term direction.

AI Boom Triggers Memory Chip Shortage

A major challenge confronting the industry is a worldwide shortage of memory chips, driven largely by surging demand from AI data centres. High-bandwidth memory (HBM) and DRAM supplies are increasingly being diverted toward AI infrastructure, squeezing availability for consumer electronics.

Industry estimates suggest that this shift could push smartphone prices up by 5–20 per cent in 2026, with the sharpest impact expected in the entry-level and mid-range segments. As smartphones incorporate more AI-driven features, consumers are facing higher prices without a corresponding rise in purchasing power.

Consumers Seek Immediate Price Relief

For ordinary buyers, the timing could not be worse. Rising inflation and premium pricing of new models have already dampened demand. Industry watchers say consumers are hoping the Union Budget will offer short-term relief through reduced customs duties on components, tax incentives, or other measures to soften the price impact.

Industry Calls for Deeper Structural Reforms

Beyond immediate relief, industry leaders are pressing for structural changes to strengthen India’s electronics ecosystem. Madhav Sheth, CEO of Ai+ Smartphones and Founder of NxtQuantum Shift Technologies, said India stands at a crucial crossroads.

“The consumer tech industry is entering a phase where simple assembly will no longer be enough,” Sheth noted, urging the government to promote deeper value creation. He called for targeted incentives for manufacturing core components such as camera modules, batteries, printed circuit boards (PCBs), enclosures, chargers and wearables, along with support for research and development, system design, and software-led intellectual property.

Push to Reduce Import Dependence

Anand Dubey, CEO of Indkal Technologies, echoed similar concerns, highlighting the sector’s growing importance to the Indian economy. He pointed out that consumer electronics manufacturing has become a major source of employment and has strengthened India’s position in global supply chains.

However, Dubey stressed the need for policies that encourage full-scale local manufacturing of critical components. “Reducing dependence on imports, particularly from China, is essential not only for supply security but also for making smartphones more affordable in the long run,” he said.

Balancing Short-Term Relief and Long-Term Self-Reliance

As Budget day approaches, policymakers face a delicate balancing act. On one hand, there is pressure to provide immediate price relief to consumers hit by rising smartphone costs. On the other, industry leaders are urging the government to stay focused on long-term self-reliance through domestic manufacturing and innovation.

The Union Budget 2026–27 is expected to reveal how the government plans to navigate this trade-off—between easing near-term consumer pain and building a resilient, globally competitive electronics manufacturing ecosystem for the future.

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