Zerodha's Nithin Kamath Warns India Will Be 'Locked Out' If Deep Tech Capabilities Not Built

Zerodha co-founder and chief executive officer Nithin Kamath has warned that India will be 'locked out' when it matters most if the country focusses on just exporting IT services, without investing enough to build the domestic deep tech ecosystem. Kamath suggests that without deep tech capability, India stays dependent on other nations for critical infrastructure. According to the domestic brokerage CEO, 'that dependence is vulnerability.'

Zerodha's chief took to microblogging platform 'X' (formerly Twitter) to say that tech seems to be getting effectively nationalized in India. 'Starting from around 2020, we've seen an increase in export controls on things like chips, critical minerals, restrictions on advanced manufacturing equipment and various other trade restrictions. Supply chains have become a security issue for countries,'' he explained.

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The India Inc leader said, 'We're no longer in a world where India can be okay with just exporting IT services. If we don't build domestic deep tech capabilities, we'll be locked out when it matters most. Self-sufficiency has become necessary insurance.'' According to Kamath, India's startup ecosystem has come a long way. ''We have genuine local talent that can build a lot of what we currently import. They just need the right support. The government push for deep tech is a step in the right direction,'' he added.

Kamath's comments come after the Ministry of Commerce and Industry last week spelled out that companies operating in fields such as artificial intelligence, biotechnology, quantum computing and advanced materials, with annual revenue of up to Rs 3 billion, would qualify as deep tech. The policy change comes in the run-up to the largest-ever AI gathering in New Delhi next week, which is expected to be attended by the who's who of the AI world, from OpenAI's Sam Altman and Sundar Pichai of Alphabet Inc. to Nvidia Corp.'s Jensen Huang and Anthropic PBC's Dario Amodei.

According to Kamath, the timing for the push towards deep tech also matters. ''If AI can pretty much produce all of the software, asset-light models will get hit. The next decade belongs to atoms, not just bits. You're already seeing this with money flowing into data centers, defense systems, batteries, semiconductors, advanced manufacturing,'' he said.

Highlighting venture capital flows, Kamath said that in the last decade most of VC investments went into eCommerce, lending, and payments. Those segments have now matured and the easy opportunities are gone. However, for deep tech, ''it's still day one''. Kamath believes that India has the talent but not the ecosystem, for building domestic deep tech capabiltities. 

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Bringing a comparison with China, the Zerodha chief said that comparing with Chinese is cliched, but China did not become an industrial superpower by accident and India can learn many lessons to that extent. Firstly, China's internal market is brutally competitive. Hundreds of startups compete in a given sector and this forces them to innovate and be efficient.

''Indian states used to do this for software parks. Why not for deep tech? Tamil Nadu, Gujarat, and Maharashtra are success stories but we need more states in the race,'' said Kamath in his post. Secondly, companies choose to manufacture in China because everything they need to manufacture is within a few miles. This industrial clustering creates genuine competitive advantages.

''You can create a design in the morning and have a prototype by evening. This density took decades to build, but we can do it if we invest with a long-term mindset,'' he said. Thirdly, China also built real bridges between universities and companies. However, in India most ideas ''die in the minds of students. Brilliant PhDs can't find the capital or institutional support to build a prototype, let alone turn them into businesses''. ''We need government procurement guarantees. Patient capital that understands hardware burns cash for years before revenue. Pathways from idea to commercialization,'' he said.

According to the Zerodha CEO, the government backing deep tech is a good move. ''But support can't just mean funding. We need R&D tax credits, subsidies, first-purchase guarantees, streamlined approvals and other incentives. All of this has to be sustained across decades, not election cycles. Without domestic deep tech capability, we stay dependent on others for critical infrastructure. That dependence is vulnerability. If we build the clusters, invest in education, fund the R&D, bridge academia to industry, and let states compete to create ecosystems, we get more than self-sufficiency. We become a deep tech exporter,'' he said.

According to the government's redeined norms for deep tech, startups seeking Indian government funding to develop next-generation technology will now be subject to rigorous vetting. From submitting materials such as incorporation documents to details of their innovation areas, companies must demonstrate significant investments in R&D, intellectual property creation, and plans to scale up and commercialize their products. Speaking on the 10th anniversary of the government's Startup India programme, Piyush Goyal said the proposed fund of funds is expected to be operationalised within this year. 

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