Rajasthan Unveils Chip and Defence Manufacturing Push, While Tightening Rules on Property Sales in ‘Disturbed’ Areas

JAIPUR, India — Rajasthan pivots toward high-tech manufacturing

Rajasthan, long known for its palaces and desert forts, moved to recast itself as a high-tech manufacturing hub this week by approving its first semiconductor policy and an expansive aerospace and defense policy, even as it tightened state control over property transactions in select urban neighborhoods.

Meeting in Jaipur on Jan. 21 under Chief Minister Bhajanlal Sharma, the state cabinet cleared the Rajasthan Aerospace and Defence Policy and the Rajasthan Semiconductor Policy-2025, a pair of incentive-heavy measures aimed at drawing large factories and research units into the state. The decisions were reported publicly the following day.

In the same sitting, the cabinet also approved a draft law on property transfers in so-called “disturbed areas,” a move ministers said was intended to preserve “demographic balance” and protect local residents from distress sales.

Taken together, the measures signal an aggressive push by the Bharatiya Janata Party government to lure investment in chips and defense manufacturing while asserting stronger control over how land in sensitive localities can be bought and sold.

Aerospace and defence: Subsidies, clusters and procurement links

The aerospace and defense policy—often referred to in official communication as the Aerospace & Defence Policy-2025—seeks to position Rajasthan as a key node in India’s defense and space supply chains at a time when New Delhi is pushing domestic production under its Atmanirbhar Bharat program.

Industries and Commerce Minister Rajyavardhan Singh Rathore, a former Union minister and Olympic medalist, has described the policy as a “forward-looking framework” designed to make Rajasthan a “leading hub in India’s aerospace and defence value chain” while integrating micro, small and medium enterprises and start-ups into procurement networks.

Project thresholds

According to details shared by state officials, manufacturing projects will be classified as large, mega or ultra-mega depending on fixed capital investment:

• Large: 500 million to 3 billion rupees
• Mega: 3 billion to 10 billion rupees
• Ultra-mega: above 10 billion rupees

For services such as maintenance, repair and overhaul (MRO) or engineering design, the thresholds range from 250 million rupees to more than 2.5 billion rupees.

Three incentive routes, plus “boosters”

To attract investors, the policy offers companies a choice among three primary incentive structures:

1. Tax reimbursement: up to 75% of state taxes for seven years.
2. Capital subsidy: 20% to 28% of fixed capital investment for manufacturing units and 14% to 20% for service units, disbursed over 10 years.
3. Output-linked support: an annual incentive equal to about 1.2% to 2% of turnover for 10 years.

On top of the chosen route, the policy layers several additional incentives, including:

• 10% to 15% tied to employment generation
• A 25% “sunrise” bonus for the first three mega or ultra-mega projects
• A 10% anchor-unit bonus
• An extra 20% for units in priority sub-sectors designated as strategic

Land and infrastructure support

Land and infrastructure support form another key part of the package. The state-run Rajasthan State Industrial Development and Investment Corporation (RIICO) will offer flexible payment terms for industrial land to mega and ultra-mega projects and provide lease-rental subsidies for qualifying office spaces.

The government has indicated that specialized clusters for aerospace and defense suppliers will be developed in existing and upcoming industrial areas, including along nodes of the Delhi-Mumbai Industrial Corridor.

Semiconductors: Rajasthan’s first chip policy

The semiconductor policy marks Rajasthan’s first dedicated attempt to join India’s semiconductor ecosystem, which is being reshaped by the central government’s India Semiconductor Mission, a program that can cover up to half the cost of eligible fab and packaging projects.

“The Rajasthan Semiconductor Policy 2025 is a step toward shaping India’s technological future,” Alok Gupta, principal secretary for industries and commerce, said in a recent public interaction, arguing that the state offers “clean energy, skilled talent, strong infrastructure, and a responsive governance framework” demanded by chipmakers.

Targeting the full value chain

Under the new policy, Rajasthan is seeking to attract anchor investments across the semiconductor value chain—from wafer fabrication and assembly, testing, marking and packaging (ATMP) to outsourced semiconductor assembly and test (OSAT) units, compound semiconductors, advanced electronics and fabless design companies.

Incentives stacked on central support

The incentives are structured to sit on top of central support. Projects approved under the India Semiconductor Mission would be eligible for additional state capital assistance, interest subsidies on term loans, and concessions on land-related charges.

Early outlines say approved units will receive:

• 100% exemption from electricity duty for seven years
• Relief on stamp duty and land-use conversion fees for industrial plots, particularly inside designated semiconductor parks to be developed within RIICO estates

Energy as a selling point

Rajasthan officials are highlighting the state’s energy profile as a core selling point. By mid-2025, the state had installed about 37.8 gigawatts of renewable power capacity, the highest in India, with roughly 70% of its overall power capacity coming from solar and wind installations.

The government argues that this can offer chip and electronics manufacturers access to relatively clean—and potentially cheaper—electricity, a major cost in semiconductor fabrication.

Property transfers in “disturbed areas” add political edge

Alongside the industrial policies, the cabinet approved the “Rajasthan Prohibition of Transfer of Immovable Property and Provision for Protection of Tenants from Eviction in Disturbed Areas Bill, 2026.”

Parliamentary Affairs Minister Joga Ram Patel told reporters the draft law is intended “to maintain demographic (social) balance” in designated localities and to protect permanent residents’ property and tenants from being pushed into distress sales “at throwaway prices.”

Under the bill, the state government can declare any area “disturbed” on the grounds of potential demographic imbalance—even in the absence of riots or ongoing violence. Once notified, transfers of immovable property in that area without prior permission from a designated authority would be rendered invalid.

Violations would amount to cognizable, non-bailable offenses, punishable by three to five years in prison and a fine.

Officials say the measure will help prevent coercive or opportunistic purchases in neighborhoods where residents feel under pressure to sell. Legal and civil-rights advocates, however, are likely to scrutinize how “disturbed areas” are identified and whether the law could be used to restrict who can buy property in mixed or minority-dominated localities—mirroring long-running debates around similar laws in other states.

Investment ambition meets local constraints

The policies come as Rajasthan tries to shift its economic image from primarily tourism and mining to advanced manufacturing and services. Since taking office in December 2023, Sharma’s administration has moved to roll out or update 13 sector-specific frameworks, including policies for global capability centers, artificial intelligence and machine learning, tourism, green growth and vehicle scrappage.

The new property bill also intersects with Rajasthan’s land-hungry industrial strategy. RIICO says it sold more than 40 billion rupees worth of industrial plots between May 2024 and January 2026, a 48% increase over the previous government’s last two years, driven in part by investment memorandums from recent summits.

How the combination of generous subsidies, abundant industrial land and stricter property controls will play out for local communities remains unclear. The aerospace and semiconductor policies emphasize job creation through employment-linked bonuses and the participation of smaller firms, and the government has signaled that skills training at industrial training institutes and engineering colleges will be stepped up.

But large, high-tech facilities also require specialized engineers and technicians and—particularly in the case of semiconductor fabs—secure supplies of high-quality water, a potential constraint in a water-scarce state where agriculture still employs a significant share of the population.

In the near term, analysts say the key tests will be whether Rajasthan can convert its policy frameworks into landmark investments and how the Assembly debates and possibly amends the disturbed areas bill. The state is competing against Gujarat, Karnataka, Tamil Nadu and Uttar Pradesh, all of which have moved earlier with sector-specific incentives and, in some cases, on-the-ground semiconductor or defense projects.

For now, Rajasthan has staked out an ambitious position: offering stacked tax, capital and power benefits to investors while promising residents that rapid industrialization will not come at the cost of their land or neighborhood composition. Whether those dual assurances can be sustained as factories—and the people who work in them—arrive will become clearer in the years ahead.