Minister of State for Electronics and Information Technology Rajeev Chandrasekhar on Thursday (June 15) attacked an eight page post by former Reserve Bank of India (RBI) Governor and University of Chicago Professor of Finance Raghuram Rajan, questioning the economist’s understanding of electronics supply chains, semiconductors, and of economics itself.
The original eight-page note, posted by Dr. Rajan and two others on LinkedIn, scrutinised the Union Government’s Production-Linked Incentive (PLI) scheme for mobile phone manufacturing, which when combined with 2018 tariffs on imports of mobile phone parts, has led to increased exports of mobile phones.
Dr. Rajan and his co-authors, Rahul Chauhan and Rohit Lamba, argued that import data, even with accommodating assumptions, showed that net exports of phones remained negative, as most components continued to be imported, and assembly alone added little value to phones — as little as 4% of the manufacturing cost, and even smaller as part of the retail price.
Mr. Chandrasekhar, after attacking “repeat offenders like” Dr. Rajan as having “no pride, self-respect, or even dignity,” didn’t deny that assembly was a low value-addition process. “This conclusion by itself is not rocket science,” he said, accusing the economist of using “false data” to draw subsequent conclusions.
“But as the component and sub-assembly ecosystem builds up, driven by scale and supported by exports, new jobs are created, value addition increases, and domestic companies join the global supply chain,” Mr. Chandrasekhar wrote. “There are many benefits—some come early, and some later. That’s the nature of attracting supply chains.”
“The article is built on the false premise that all key electronics imports are only for the purposes of mobile production,” Mr. Chandrasekhar continued. “This is the first lie. Mobile production utilizes only part of the total key imports of $32.4 billion. Every other conclusion that follows is consequently flawed.” Mr. Chandrasekhar added that an even smaller portion of the imported components went into phones whose production was supported by PLI incentives.
Mr. Chandrasekhar also criticised Dr. Rajan’s post for relying on advice from an unnamed industry executive. More remarkably, he says the government reached out to “ICEA, MAIT, CII, FICCI, ASSOCHAM, even IAMAI”—six industry associations—to find out if any of their members had aided the economist in drafting this post. “Rajan should come out in the open and declare his sources,” Mr. Chandrasekhar wrote. “But that is usually asking for too much in a political hitjob article inspired by his ‘leader’ Rahul Gandhi.”
Dr. Rajan, in a statement to The Hindu, steered clear of the personal attacks in the response. “I am glad that the government has finally been pushed to look at the data rather than spouting empty export numbers,” he said in an emailed response. “The minister admits it [the value addition in mobile phones made in India] is assembly and hopes we will turn to manufacturing some day. I too hope that it will be the case.”
