Prime Minister Narendra Modi's "Make in India" drive has helped to turn India into the world's second biggest mobile manufacturer after China. New Delhi believes it is time for chip companies to set up in the country.

"The government will give cash incentives of more than $1 billion to each company which will set up chip fabrication units", a senior government official told Reuters.

"We're assuring them that the government will be a buyer and there will also be mandates in the private market for companies to buy locally made chips."

India also wants to establish reliable suppliers for its electronics and telecom industry to cut dependence on China following border skirmishes last year.

Chips made locally will be designated as "trusted sources" and can be used in products ranging from CCTV cameras to 5G equipment.