India has inched past Japan in terms of Gross Domestic Product and has become the fourth-largest economy in the world, as per data from the International Monetary Fund (IMF). This feat has led to a wave of jubilation in India, across policy and business circles. However, Zerodha co-founder and CEO, Nithin Kamath has offered a tempered and sobering reflection on the matter, urging stakeholders to look beyond headline figures and focus on long-term, structural reform, particularly in education, productivity, and research.

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

Kamath’s remarks come at a time when India’s rapid economic rise is often framed in terms of absolute GDP size. However, Kamath has warned that such comparisons only mask deeper issues.

“When you look at important metrics like productivity, labour force participation, and perhaps most importantly, R&D spending, we have a long way to go,” he wrote.

According to Kamath, India’s spending on research and development stands at just 0.7% of its GDP, far below China’s 2.4%, South Korea’s 4.8%, and Israel’s 6%.

“One of the biggest long-term challenges for Indian growth is this chronically low R&D spending,” he noted, adding, “To be clear, this is both a government problem and a private sector problem as data shows. It's unfair to expect the government alone to solve this.”

Kamath further cautioned against complacency in a rapidly evolving global context: “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.”

Interestingly, Kamath attached two studies with his tweet. In one chart, with data culled from OECD and India’s National Science & Technology Management Information System, he showed two things: a comparative analysis of Gross Domestic Expenditure on Research and Development (GERD) across 15 countries in 2020 shows that in most developed and emerging economies, business enterprises play a dominant role in funding science and technology-related R&D. In countries like China (77%), Japan (79%), South Korea (79%), and the US (75%), over 70% of GERD is contributed by the private sector. But the situation in India is starkly different. Here, it is the government which contributes a substantial 50% of GERD, while business enterprises account for only 41%. The higher education sector contributes 9%, a modest share compared to countries like South Africa (27%) and the UK (24%). This indicates that while India has made significant strides in public sector R&D investment, private sector participation remains relatively underdeveloped.

Kamath, therefore, urged that private sector must step up and increase R&D spending in science and technology, because the government alone cannot be expected to shoulder this responsibility.

Without meaningful investments in education and research, Kamath warned, India risks losing its best minds to other countries, squandering its demographic dividend and falling short of its long-term potential.

“Unless we build an ecosystem that invests in education and research... higher long-term growth rates will remain out of reach,” Kamath warned.

He concludes by saying that the solution isn’t easy. “It requires long-term efforts to transform education, streamline regulations, and create an environment with the right incentives for India's brightest minds to discover and build in India, for India.”