Under the plan, India's government will extend fiscal support of up to half of a project's cost to eligible display and semiconductor fabricators, the government said in a statement.

Israel's Tower Semiconductor, Taiwan's Foxconn and a consortium from Singapore have shown interest in setting up chip factories in India while Vedanta Group was keen to set up a display plant.

The government statement said: "The programme will usher in a new era in electronics manufacturing by providing a globally competitive incentive package to companies in semiconductors and display manufacturing as well as design."

The drive comes as some companies look to diversify their manufacturing bases beyond China due to the ongoing trade war between Washington and Beijing and is a sign India is trying to move up the electronics value chain.

India's plan to incentivise semiconductor manufacturing also comes at a time when automakers and tech companies around the world are grappling with a global chip shortage.

Technology Minister Ashwini Vaishnaw told a news briefing the plan would help develop "the complete semiconductor ecosystem - from the design of semiconductor chips to their fabrication, packing and testing in the country".