New Delhi: A comment by former Reserve Bank of India (RBI) governor Raghuram Rajan on why India should manufacture chipsets when they can be smuggled, has led to a major backlash.
Rajan, in an interview to Frontline, questioned India’s push for building a domestic semiconductor ecosystem, while suggesting that the focus must be on improving the fundamentals and a better business environment.
In the interview, published on September 1, Rajan asked why India was pouring “billions” into developing a domestic industry. Chipsets, being relatively small, are “the most easily smuggled thing on Earth”, he said, adding that China and Russia were already smuggling them en masse.
Semiconductors power modern economies and militaries, from smartphones to fighter jets. 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.
Since then, the effort has 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 approved Semicon 2.0 recently with a Rs 1.275-lakh-crore outlay, taking its total semiconductor push to a much larger scale.
New Delhi is pouring so much resources into making chipsets at home as they are required for nearly every modern item – from the humble smartphone in our pockets, to the multi-million dollar fighter jet sitting on a tarmac somewhere, as reported by India Today.
Only a select 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.
Technology can be weaponised for strategic gains in this digital age, and that is a scenario India would want to avoid. For example, in 2021, the shortage of semiconductors hit sales of vehicles in India.
Rajan questioned the effectiveness of the government’s broader industrial policy of picking sectors for targeted support. India should instead focus on fundamentals such as education, healthcare, infrastructure and creating a better business environment, he argued.
“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 said.
The former RBI head 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.
India’s large overseas diaspora could, by itself, provide an alternative route to procure chipsets, he argued, 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”.
There was a huge backlash on social media to Rajan’s views on India’s semiconductor push, with many 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.
Rajan demonstrate his proposed smuggling strategy and draft a research paper on the same, others suggested.
“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.”
“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”.
