Why make, just smuggle? Raghuram Rajan questions India's chip push, gets trolled

Industrial initiatives find their share of critics, but rarely will you hear an ace economist say, "why build, when you can smuggle?" That's exactly what former Governor of the Reserve Bank of India (RBI), Raghuram Rajan, has done while questioning India's push for building a domestic semiconductor ecosystem. Rajan, who made the remarks while suggesting that the focus must be on improving the fundamentals and a better business environment, is now being ridiculed and trolled.In an interview with Frontline magazine, published on September 1, Raghuram Rajan questioned the rationale behind New Delhi's semiconductor push, asking why India was pouring "billions" into developing a domestic industry. He argued that most chipsets, being relatively small, are "the most easily smuggled thing on Earth", adding that China and Russia were already smuggling them en masse.From smartphones to fighter jets, semiconductors power modern economies and militaries. India has been pushing to set up a domestic chipset ecosystem since at least 2021, when it launched the Rs 76,000-core Semicon India Programme, offering substantial government subsidies for fabrication units, packaging, testing and design.The effort has since then drawn over Rs 1.64 lakh crore in investment commitments across 12 projects being built by Tata Electronics, Micron and others. At least three of these projects had commenced operations as of July 2026, while India has expanded its domestic chip design capabilities. The centre also recently approved Semicon India 2.0 with a Rs 1.275-lakh-crore outlay, taking its total semiconductor push to a much larger scale. WHY INDIA NEEDS A CHIP-MAKING ECOSYSTEMThere's a reason why New Delhi is pouring so much resources into making chipsets at home. From the humble smartphone in your pocket, to the multi-million dollar fighter jet sitting on a tarmac somewhere, chipsets are ubiquitous.That being said, only a precious few countries around the world possess the technical know-how and the industrial capability to churn out advanced semiconductors and chipsets at scale. Those countries, such as Taiwan, South Korea, the US, the Netherlands among others, not only tightly control who gets to purchase their products, but also zealously guard the secrets of their production. Take, for instance, Russia, which, as Rajan had pointed out, is forced to smuggle in chipsets after being under suffocating economic sanctions for its ongoing invasion of Ukraine.In this digital age, technology can be weaponised for strategic gains, and that is a scenario India would want to avoid. For example, in 2021, the shortage of semiconductors hit sales of vehicles in India. Maruti Suzuki, the country's biggest carmaker, warned that production in September 2021 would fall by 60% due to the shortage, accoding to a Reuters report from August that year.The vital importance of these chipsets and semiconductors and the ease at which those producing them can cut off supply to others, explains why India has treated semiconductors as a strategically important commodity for years. Yet according to Raghuram Rajan, there is little need for a domestic industry when they can be smuggled in for outside.WHY DID FORMER RBI GOVERNOR RAGHURAM RAJAN DISAGREE WITH INDIA'S SEMICONDUCTOR PUSH?Raghuram Rajan’s comments on India’s semiconductor push came during an interview with Frontline magazine, in which he questioned the effectiveness of the government’s broader industrial policy of picking sectors for targeted support. He argued that India should instead focus on fundamentals such as education, healthcare, infrastructure and creating a better business environment.It was in this context that the former RBI governor questioned why India was spending billions of dollars to build a domestic semiconductor industry."When I see people say that India needs to make semiconductor chips [by pouring several billion dollars], my question is, why? This is the most easily smuggled thing on Earth," Rajan attested.He pointed to China's ability to procure advanced Nvidia chips via purchases through intermediaries based in Thailand and Malaysia and Russia's continued access to less advanced chipsets despite sanctions."Those big Nvidia chips, you can’t smuggle them in suitcases, but the rest you can. Who’s going to prevent you from buying it?" he told Frontline.Rajan also argued that India could never by itself achieve full domestic self-sufficiency in chip making due to the need to procure inputs like machinery and raw materials."We can never be so independent in chip manufacturing that we will not need to source inputs globally," Rajan stated.He also argued that India's large overseas diaspora could, by itself, provide an alternative route to procure chipsets, stating, "We have more than 35 million Indians in our global diaspora community, so even if everybody shuns us, the diaspora will at least buy these chips for us". While this same diaspora has demonstrated their ability to bolster their homeland's forex reserves, it is yet unknown whether they can also furnish a sufficient supply of foreign-made chipsets.He then stressed that India should not abandon attempts at self-sufficency altogether, but rather be more selective about what industries it considers "strategically important.""When I say strategic, let’s be careful about what we want,” Rajan said, arguing that defence manufacturing was a more critical area for self-reliance because India could not afford to run out of munitions during a war.RAJAN'S SEMICONDUCTOR CRITIQUE DRAW SOCIAL MEDIA BACKLASHRajan's views on India's semiconductor push drew a sharp backlash on social media, with critics latching onto his remarks on smuggling chips."Absolutely brilliant from Raghuram! Why didn't we think of it before – smuggle cars, trucks, rockets, satellites, smuggle computers.....and, of course, smuggle chips! Why bother developing any IP, manufacturing capability, ability to scale etc? This fellow was made RBI Governor!!" entrepreneur Ashutosh Malik quipped sarcastically in a post on X.Others suggested Rajan demonstrate his proposed smuggling strategy and draft a research paper on the same."Raghuram Rajan should personally stuff some chips... demonstrate how smuggling can be done. He can then write a detailed paper about his experiences," author Rajeev Mantri wrote on X, adding that "In one stroke, he can prove that India’s semiconductor manufacturing efforts are unnecessary. A new jugaad technique created by him can meet India’s needs."People responded satirically to the economist's suggestion."Air hostess arrested in Kerala after Nvidia Blackwell chip was found in her rectum," posted investment expert Viraj Raundal on X, saying such would be "news headlines if the diaspora starts listening to Raghuram Rajan".CAN SMUGGLING SUBSIST A DOMESTIC CHIPSET INDUSTRY IN INDIA?Raghuram Rajan has said that smuggling in chipsets would be a better alternative to pouring billions into developing a domestic industry, citing Russia and China's experiences.That being said, Russia and China are not smuggling in chips and semiconductors because they want to save the money required to set up domestic manufacturing ecosystems. Russia was forced to smuggle chips from intermediaries in countries like China, Turkey, and the UAE among others, due to Western sanctions following the 2022 invasion of Ukraine.In the case of China, it had to resort to smuggling in advanced Nvidia chips despite having a substantial domestic semiconductor industry of its own after US restrictions were placed on what Beijing could or could not buy.It can thus be argued that the examples of China and Russia further bolster India's case for developing a domestic semiconductor industry. Given the fact that the ability to produce advanced chips at scale is restricted to a limited number of nations, their applications, and how easily their supply can be cut off, it is all the more important that New Delhi becomes as self-sufficient as possible. But the context in which Rajan made the remarks, of better fundamentals and quality of life, is equally important.- EndsPublished By: Shounak SanyalPublished On: Sep 4, 2026 14:17 IST