9 hrs ago
Vembu Says Manufacturing Alone Cannot Raise India’s Wages
Sridhar Vembu says building factories is helpful, but it may not be enough to make Indian workers much richer.
He argues that countries earn more when they own the ideas and technology inside the products they make.
He used iPhone factories in India and China as an example of different wage outcomes.
Vembu says Indian workers can do valuable research for global companies without India receiving the full benefits of that work.
He believes India should create more companies that develop and own their own technology.
He also supports government policies that help local industries grow stronger.
The debate involves whether India should focus mainly on open economic policies or actively guide industrial development.
Vembu points to Japan, Taiwan, South Korea, and China as examples of countries that built industrial and technological capabilities.
Zoho co-founder Sridhar Vembu argues that manufacturing alone will not create higher-paying jobs in India.
He says India must build companies that own intellectual property, research, and technology.
Vembu compared iPhone factory wages in Tamil Nadu and China to illustrate differences in captured economic value.
He argued that global companies may conduct research in India while retaining most intellectual-property value elsewhere.
Vembu supports industrial policy to help Indian companies develop capabilities and compete globally.
- Who
- Zoho co-founder Sridhar Vembu, responding to comments attributed to former Reserve Bank of India governor Raghuram Rajan.
- What
- A debate over whether manufacturing alone can raise wages or whether India must also develop and own intellectual property.
- Where
- The discussion concerns India, including iPhone manufacturing in Tamil Nadu and research operations based in India.
- When
- Vembu made the argument in a post on X; no specific date is given.
- Why
- Vembu argues that owning technology and intellectual property allows a country to capture more economic value and pay higher wages.
Vembu’s industrial-policy argument
Skepticism toward industrial policy
What raises wages?
Vembu’s industrial-policy argument
Vembu argues that factories and assembly work alone will not deliver high wages; India must own more research, technology, and intellectual property.
Skepticism toward industrial policy
The article attributes to Raghuram Rajan a position skeptical of a national industrial policy, but it does not provide a direct statement from Rajan explaining his full view.
Role of global companies
Vembu’s industrial-policy argument
Vembu says India can provide skilled workers and research for multinational companies without retaining a proportionate share of the value created.
Skepticism toward industrial policy
The alternative perspective, as presented through the policy disagreement, places less emphasis on directing economic development through a national industrial policy.
Development strategy
Vembu’s industrial-policy argument
Vembu favors helping domestic entrepreneurs and industries build capabilities, citing East Asian economies as examples.
Skepticism toward industrial policy
Vembu says a more market-oriented approach could leave India with large-scale, lower-wage manufacturing without the technological capabilities of richer Asian economies.
Key facts
- Central argument
- Manufacturing can create jobs, but Vembu says higher wages require domestic ownership of technology and intellectual property.
- iPhone comparison
- Vembu said an average worker at an iPhone factory in Tamil Nadu would need about five months of work to afford an entry-level iPhone, compared with about one month for a comparable worker in China.
- NVIDIA example
- Vembu cited NVIDIA's annual gross profit as more than $200 billion and said about 24% of its employees are based in India, largely in research and development.
- Microsoft example
- Vembu said about 40% of Microsoft's research and development workforce is in India and cited annual gross profit of about $230 billion.
- Policy disagreement
- Vembu criticized what he described as a more skeptical view of industrial policy, which he associated with Raghuram Rajan and the Chicago School.
- Countries cited
- Vembu pointed to Japan, Taiwan, South Korea, and China as examples of economies that developed industrial and technological capabilities.
Quotes
Sridhar Vembu
Zoho co-founder commenting on the comparison between Indian and Chinese iPhone factory workers
“The work is the same”
firstpost.com
Sources
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