Bharat cannot become a technological power while remaining dependent on others for the silicon brains that run its economy and defend its sovereignty
Former RBI Governor Raghuram Rajan is entitled to question the Narendra Modi government’s semiconductor strategy. Economists should question government spending. Subsidies must be scrutinised. Public money cannot be wasted.
But there is a point at which legitimate economic caution begins to look like an inability—or unwillingness—to appreciate how dramatically the global economic order has changed.
Rajan’s argument against heavy semiconductor subsidies is essentially that Bharat would be better served by investing the money in basic education and scientific infrastructure rather than joining an expensive global race to manufacture chips.
There is merit in demanding better schools, laboratories and scientific education. But why should Bharat have to choose between producing scientists and producing the technologies those scientists will build?
That is the fundamental flaw in the argument.
Semiconductors are no longer merely an industrial product. They are the foundational technology behind artificial intelligence, telecommunications, automobiles, satellites, medical equipment, energy systems, computers, smartphones and modern weapons. NITI Aayog itself describes semiconductors as central to India’s economic growth, national security and technological sovereignty.
And here is the uncomfortable fact: around 90–95 per cent of Bharat’s present semiconductor demand is still met through imports.
That is not merely an economic statistic. It is a strategic vulnerability.
NITI Aayog has warned that Bharat’s dependence on imported chips exposes critical sectors to supply-chain disruptions, particularly because global semiconductor production is concentrated in a handful of countries. Any major disruption involving Taiwan, China or other critical manufacturing centres can affect automobiles, consumer electronics, healthcare and defence.
So the question is not whether semiconductor subsidies are fashionable.
The question is: Can a country aspiring to become a developed, technologically sovereign and globally competitive economy afford to remain dependent on foreign suppliers for the basic electronic building blocks of modern life?
The answer must be no.
Look at what the rest of the world is doing. The United States, China, Taiwan, South Korea, Japan and Europe are all pursuing semiconductor self-reliance through enormous public-policy interventions. They have understood something that Bharat can ignore only at its peril: in the next economic and geopolitical contest, control over critical technology and supply chains will be as important as control over oil once was.
Bharat has therefore not entered this sector blindly.
The Semicon India Programme began with a ₹76,000-crore outlay. By 2026, the government had approved 12 semiconductor manufacturing projects involving more than ₹1.64 lakh crore of investment, covering fabrication, compound semiconductors and packaging. Three projects had already begun commercial production.
And this is precisely why the argument that the government is simply throwing money at “chip factories” is misleading.
The objective is to create an ecosystem—design, fabrication, packaging, testing, equipment, materials, research and skilled manpower.
The newly expanded Semicon 2.0, with an outlay of ₹1,27,500 crore, goes still further, explicitly targeting indigenous chip design, advanced packaging, semiconductor equipment and materials, research and development and the wider manufacturing ecosystem.
This is not merely about producing a few silicon wafers.
It is about creating technological capability.
It is also about correcting a historical weakness in Bharat’s development model. For decades, Bharat demonstrated extraordinary strength in software and services while remaining heavily dependent on others for much of the hardware underneath them.
That model cannot carry Bharat into the next phase.
Artificial intelligence requires computing infrastructure. Computing infrastructure requires chips. Telecommunications requires chips. Electric vehicles require chips. Space technology requires chips. Precision weapons require chips.
Even the most sophisticated software is ultimately useless if somebody else controls the hardware on which it runs.
Rajan is right to demand accountability for every rupee of subsidy. But that argument should lead to better targeting, transparent incentives and performance-linked support—not to technological hesitation.
And there is another false choice that needs to be rejected.
Bharat absolutely needs better schools, universities, laboratories and scientific research. But a semiconductor industry itself creates demand for precisely those skills. It brings engineers, researchers, technicians, designers, equipment manufacturers and suppliers into one ecosystem. It creates an industrial environment in which scientific knowledge can be converted into commercially valuable technology.
The real danger is not spending too much on semiconductors.
The real danger is spending too little and discovering a decade from now that the rest of the world owns the technology on which our economy and national security depend.
This is where some critics of Bharat’s economic transformation appear trapped in an older idea of what India should aspire to be.
Bharat is no longer merely trying to provide inexpensive labour or services to the developed world. It is attempting to move up the technological value chain—from consuming technology to designing it, manufacturing it and eventually controlling critical intellectual property.
That transition will require investment, patience and, yes, some calculated government risk.
No serious economist should object to asking whether the risk is being managed properly.
But dismissing the strategic necessity of building domestic semiconductor capability is another matter.
Bharat cannot aspire to become a global economic, defence and technological power while remaining dependent on somebody else for the tiny silicon brains that make that power possible.
That is not economic nationalism.
It is economic common sense.
And if Bharat’s critics continue to underestimate the country’s capacity to build, manufacture and compete, perhaps the question is not whether Bharat’s economic ambitions are unrealistic.
Perhaps it is time to ask whether their economic assumptions have simply failed to keep pace with Bharat.
