Zerodha CEO Nithin Kamath flags key challenges as India becomes 4th largest economy: 'GDP comparisons only tell you...'

While Nithin Kamath, chief executive officer and co-founder of Zerodha, hailed India's ascent to the fourth-largest economy in the world amid multiple challenges, he also called for looking just beyond the GDP numbers.

The 45-year old entrepreneur offered a sobering reality check as he believes that GDP rankings don’t tell the full story.

In a surprise announcement, NITI Aayog Chief Executive Officer (CEO) BVR Subrahmanyam said, citing data by the International Monetary Fund, over the weekend announced that India has overtaken Japan to become the world's fourth-largest economy.

The official IMF data of GDP for 2025 marked India's position at $4.19 trillion based on the current prices.

“It's amazing that despite all the challenges, we're now the 4th largest economy in the world. Having said that, at the risk of sounding like a spoilsport, GDP comparisons only tell you so much,” Nithin Kamath said in a post on social media platform X on Tuesday, May 27.

India growth story: Long-term challenges await

Kamath acknowledged the milestone but emphasised that India’s growth trajectory faces critical long-term challenges, especially in areas that don’t often make headlines — productivity, labor force participation, and research & development (R&D) investment.

Kamath pointed out a glaring gap in India’s innovation engine: R&D spending. India currently allocates just 0.7% of its GDP to research and development — a figure that significantly lags behind global innovation leaders. By comparison, China spends 2.4%, South Korea allocates 4.8% and Israel earmarks 6%.

Kamath believes R&D spending is significant amid the future characterised by deep tech and artifical intelligence, and a lag on this front could cost India economically.

“To continue growing in an increasingly fragmented world and an uncertain future that might be shaped by AI, I'm not sure we can continue doing what we've done so far,” he said. Kamath further added that one of the biggest long-term challenges for Indian growth is this chronically low R&D spending.

Kamath was quick to stress that the R&D shortfall isn't just a government issue. While public spending plays a critical role, India’s private sector has also underinvested in innovation.

In a graph shared by Nithin Kamath in his tweet, he highlighted that in most of the developed and emerging economies, the participation of business enterprises in Gross Domestic Expenditure on Research and Development (GERD) is generally more than 50%.

For economies like China, Japan, South Korea and USA, the figure is over 70%.

Demographic dividend: Missed opportunity?

Kamath warned that unless we build an ecosystem that invests in education and research, we remain at the risk of not only our best minds leaving India, but higher long-term growth rates also remaining out of reach.

“We'll also miss out on taking advantage of our demographic dividend,” he added.

Fixing this won’t be easy, Kamath admits. It requires decades-long commitment to reforming education, simplifying regulation, and creating a culture that rewards research, risk-taking, and innovation. “Without this, we'll never truly realize our potential,” Kamath said.

As India basks in its growing economic clout, Kamath’s message is a timely reminder: GDP growth may get you in the spotlight — but innovation is what would keep you there.

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