May 29 (Reuters) - United Parcel Service ( UPS ), the

world's biggest parcel delivery firm, is in talks with several

Indian state governments to make some of the tags used in

tracking packages in the Asian country, a senior executive told

Reuters on Wednesday.

Semiconductor manufacturing is among Prime Minister Narendra

Modi's key business agendas as he pursues an ambition of making

the country a chipmaker for the world, even though the Indian

government faced setbacks in its initial bid to offer $10

billion in incentives to the industry.

"We are working with potential partners ... What we are

trying to do in India is leverage the semiconductor investments

the government is making," Chief Digital and Technology Officer

Bala Subramanian said in an interview.

UPS began expanding its use of radio-frequency

identification (RFID) tags on packages about two years ago,

helping its workers avoid millions of package scans per day and

reducing lost and misdirected packages.

"For every place across the world we'll be actually building

... the tags in India," Subramanian said, without giving details

on the investment size or when it would begin manufacturing,

adding it is "too early" to discuss such details.

Reuters could not immediately verify where UPS makes the

RFID tags it currently uses.

UPS does not currently have any manufacturing capability in

India, though it opened in August its first technology centre in

Chennai, Tamil Nadu, which complements its existing U.S. and

European teams to develop in-house technology.

"We will continue to grow (in Chennai)," Subramanian, who

was previously the digital chief for Best Buy ( BBY ) and AT&T ( T )

, said.