The India Electronics and Semiconductor Association (IESA) has said the union cabinet’s approval of the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 will provide much-needed liquidity to micro, small and medium enterprises (MSMEs) that form the backbone of India’s electronics manufacturing ecosystem.

The industry body highlighted that the scheme’s 100% credit guarantee, zero guarantee fee and additional working capital support come at a crucial time when businesses are dealing with global supply chain disruptions and geopolitical uncertainties.

The Union Cabinet on Tuesday approved the ECLGS 5.0, aiming to facilitate an additional ₹2.55 lakh crore in credit—including ₹5,000 crore set aside for airlines—to help businesses manage liquidity pressures arising from the West Asia crisis.

MSMEs central to electronics ecosystem

“MSMEs are the backbone of India’s electronics and semiconductor ecosystem, supporting the sector across manufacturing, components, semiconductor supply chains, repair economy, materials and design services,” said Ashok Chandak, President of IESA.

He added that the collateral-free and fully guaranteed credit support under ECLGS 5.0 will help firms sustain operations, protect jobs and continue investments in growth and technology upgrades.

IESA noted that MSMEs play a critical role across component manufacturing, electronics manufacturing services (EMS), repair and refurbishment, tooling, materials and design-led innovation. The segment accounts for a large share of the industry’s units and contributes significantly to localisation, employment generation and supply chain resilience.

According to the industry body, MSMEs contribute nearly 30% to India’s GDP, about 35% of manufacturing output and over 45% of exports, while employing more than 32 crore people nationwide.

Boost to supply chain resilience, localisation

For the electronics and semiconductor sector, where inventory cycles and working capital are key, the scheme is expected to act as a confidence booster, particularly for Tier-2 and Tier-3 suppliers.

Chandak said the scheme would enable smaller firms to integrate faster into global value chains, strengthen domestic supply chains and support India’s ambition of building a $500-billion electronics manufacturing ecosystem.

IESA also pointed out that ECLGS 5.0 complements ongoing government initiatives such as the India Semiconductor Mission, Electronics Component Manufacturing Scheme (ECMS), Production-Linked Incentive (PLI) schemes and the broader Make in India programme by improving credit access for smaller enterprises.

The scheme’s one-year moratorium and extended loan tenure are expected to further help MSMEs scale up capacities, enhance competitiveness and accelerate domestic value addition.

The Union Budget 2026-27 has already outlined a three-pronged strategy to support MSMEs through improved access to equity, liquidity and professional support, positioning the sector as a key driver of India’s manufacturing and export growth.