Webddesk: Though India has its fantasies of replacing world economic superpowers, it is an institution that does not boast much as far as original world-class innovation is concerned. While policymakers celebrate projections of becoming the ‘third-largest economy’, critics argue that India’s growth is hollow, driven by domestic monopolies, state protectionism, and a lack of globally recognised brands.
Former Reserve Bank of India (RBI) Governor Raghuram Rajan is among those sounding the alarm, warning that India’s economic rise is built on shaky foundations unless it can shift from imitation to innovation.
Former Reserve Bank of India Governor Raghuram Rajan believes that India’s growth in being an economic giant won’t mean much unless the country becomes a true leader in innovation, according to media reports.
Writing in The Times of India, Rajan, who now teaches at the University of Chicago, pointed out that India has not produced a single globally recognised product brand, despite having a large domestic market and government backing for big businesses.
According to Rajan, India’s major companies are dominant at home but remain insignificant players globally. He writes, “We do not have one company that is known across the world for its products. No Nintendo, Sony or Toyota. No Mercedes, Porsche or SAP.”
Even though India keeps its car market protected with steep import duties, he notes that “not one Indian car model has been sold in large quantities in the developed world.”
Rajan highlights that while India’s automobile exports do exist, they are mostly limited to budget-conscious or smaller markets. In comparison, countries like China are now setting the pace globally in electric vehicles, advanced battery technologies, and self-driving systems.
The things stated by Rajan can be observed well, as even the much-hyped ‘entry’ of Tesla into India may seem exciting at first glance, but upon closer look, these arguments gain weight.
The move appears largely symbolic, not strategic. The Tesla Model Y, made in China, costs over $56,000 before taxes, far out of reach for the average Indian buyer.
Without local manufacturing plans and with import taxes that can push prices up by 100 per cent, Tesla cars would likely end up as luxury showpieces rather than part of a broader shift towards affordable electric vehicles in India.
This measure, instead of strengthening India in clean mobility goals, appears more addressed to satisfy the metropolitan population. Within a country so desperate to see mass-market electric vehicles accessible to everyday people, the introduction of high-voltage, luxury models by Elon Musk may feel like a disconnect to the Indian market as it currently exists.
More to the point, the very fact that Tesla has chosen to not establish production in India not only prevents employment of local citizens but also serves to be a blow to the “Make in India” program, simply losing a large opportunity to take part in the self-reliant industrial focus.
Additionally, Rajan further criticises India’s current economic environment, which he says protects domestic firms from true competition. He calls this system “riskless capitalism,” one in which government policies keep foreign competition at bay, removing the need for local firms to innovate.
There is a block on foreign products even through tariffs and strict regulations against international corporation such as Walmart to enter the market easily.
This type of protection, Rajan argues, renders companies complacent. They do not experience the pressure to develop new concepts or venture into international markets when the replication of established models can serve to please domestic clients. “As the domestic market grows larger, the problem gets worse,” he warns. “Why innovate or go global, when steady imitation is enough?”
Even in industries like pharmaceuticals and IT, where India does operate internationally, Rajan sees a lack of real innovation. He points out that drug companies are stuck producing generics and haven’t moved into developing new treatments.
Meanwhile, Indian software firms that thrived during the early 2000s haven’t managed to create any globally successful digital products. “Where is the Indian TikTok, DeepSeek, ChatGPT, or even Fortnite?” he asks. India may have local versions, but they lack originality and don’t carry global weight.
He also blames a weak research and education system. Rajan says there are not enough strong university research programmes or channels to turn research into commercial products. He appreciates the creation of the new Anusandhan National Research Foundation, but believes its funding needs to be massively increased.
To fix this, Rajan suggests cutting import tariffs, allowing more foreign investment, and breaking up monopolies. A more competitive home market would force businesses to raise their game. He also calls for better research funding and fewer bureaucratic hurdles in higher education.
More than just economic growth, Rajan says innovation is now tied to national security. In today’s geopolitical climate, India will need smarter technology and modern strategies. Referring to the ongoing war in Ukraine, he notes that superior tech and tactics are becoming essential in defence.
Without investing in innovation, India risks falling short not just economically, but strategically too.
Rajan closes with a warning: becoming a large economy is not enough. If India wants to grow rich before its population grows old, it must embrace innovation. “We must become one of the most innovative countries… As a collateral benefit, our firms will become household names globally,” he writes.
Shubhankar Mishra exposed the sad reality of ‘Two Indias’ —
— Ankit Mayank (@mr_mayank) July 7, 2025
7 crore earn less than ₹62 everyday
116 crore earn less than ₹171
While top 1% hold 40% wealth 🤯
India is officially the 4th largest GDP with poor people 💔 pic.twitter.com/ufZeM8L4VY
India’s obsession with economic size risks becoming a dangerous illusion if not backed by genuine innovation and global competitiveness. Raghuram Rajan’s critique lays bare the uncomfortable truth regarding India’s growth: that a protected domestic market, policy-favoured corporate elites, and weak research infrastructure have created an economy more inward-looking than forward-thinking.
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