Archive · 4 Sep 2026
Vembu Says Rajan’s Economic Path Could Lead India to Mexico
Sridhar Vembu and Raghuram Rajan disagree about how India should grow its economy.
Rajan emphasizes services, education and knowledge-based work.
Vembu says India also needs a strong manufacturing industry.
He argues that simply assembling products designed elsewhere does not bring enough money to India.
The most valuable parts often belong to companies that own the technology, brands and patents.
Vembu compares this risk to Mexico, which has many factories but often does not own the highest-value ideas.
He compares South Korea with a more successful model because its companies developed major technologies and brands.
Vembu wants India to build factories and create globally competitive companies that own innovations.
Zoho founder Sridhar Vembu criticized Raghuram Rajan’s opposition to national industrial policy.
Vembu argued that low-value manufacturing and services alone may not raise Indian wages substantially.
He said countries capture more value when they own technology, brands, patents and intellectual property.
Using iPhone production in Tamil Nadu, Vembu contrasted Indian assembly wages with those in China.
Vembu urged India to build research-driven companies, comparing Mexico’s supply-chain role with South Korea’s industrial success.
- Who
- Zoho founder and chief scientist Sridhar Vembu is criticizing former Reserve Bank of India governor Raghuram Rajan’s economic views.
- What
- Vembu argues that India needs industrial policy, advanced manufacturing and domestic ownership of technology and intellectual property.
- When
- The latest comments followed Rajan’s recent interview and Vembu’s September 4, 2026 social-media post.
- Where
- The discussion focuses on India, including iPhone manufacturing in Tamil Nadu, with comparisons to Mexico and South Korea.
- Why
- Vembu believes services and low-value assembly alone could leave India with limited wages, productivity and domestic value capture.
Raghuram Rajan’s Approach
Sridhar Vembu’s Approach
Role of manufacturing
Raghuram Rajan’s Approach
Rajan argues that the traditional East Asian export-manufacturing model is harder to replicate because automation has reduced labor intensity and China dominates manufacturing.
Sridhar Vembu’s Approach
Vembu says manufacturing remains essential, even though India must move beyond low-value assembly.
Main growth engine
Raghuram Rajan’s Approach
Rajan emphasizes human capital, services and value-added knowledge industries as important sources of growth and employment.
Sridhar Vembu’s Approach
Vembu argues that services and factory work must be combined with domestic research, proprietary technologies and intellectual-property ownership.
Industrial policy
Raghuram Rajan’s Approach
Rajan opposes industrial policy at the national level, according to the article.
Sridhar Vembu’s Approach
Vembu supports a deliberate industrial policy aimed at creating globally competitive Indian companies and capturing more value.
- Central disagreement
- Rajan emphasizes services and knowledge industries, while Vembu calls for a stronger manufacturing and industrial-policy focus.
- Vembu’s warning
- India could resemble Mexico if it remains mainly an assembly location without owning high-value technology and intellectual property.
- Preferred comparison
- Vembu points to South Korea’s use of industrial policy, export promotion and technology development.
- Example cited
- Vembu referred to iPhone factories in Tamil Nadu and differences between Indian and Chinese assembly wages.
- Value capture
- The article says the greatest gains often go to companies controlling patents, brands, technology and design.
- India’s current position
- India has established software-services strengths and is attracting increasing manufacturing investment, particularly in electronics.