A renewed debate has surfaced on the direction India’s economic growth and job creation should take, after former RBI governor Raghuram Rajan’s view favouring service-sector-led growth drew criticism from Zoho founder Sridhar Vembu.
Vembu argued that relying too heavily on services could leave India vulnerable to a “Mexico-like” outcome—where a country becomes a global manufacturing base, but key technologies, design capabilities and a large share of profits remain abroad.
He said assembling imported components locally may not translate into higher wages for workers or greater national gains. In his view, India needs manufacturing backed by intellectual property to build global companies on the scale of South Korea and achieve stronger long-term growth.
Rajan’s broader argument, as presented in the discussion, points to changing global realities: rising automation and China’s dominance in manufacturing make export-led manufacturing success harder than before.
Given these constraints, the service sector, human capital and value-added knowledge-driven work should receive greater focus, the argument goes, as a key foundation for future employment and economic expansion.
