‘No Indication Of Recession In India, Else Markets Would Have Reacted’

On the sidelines of Invest Karnataka Summit 2022, BW Businessworld caught up with Nithin Kamath (Founder and CEO at Zerodha) to understand more about the recession fears and how it could affect the startups in the country

All the BigTechs, Silicon Valley innovators and financial behemoths are now preparing for the looming recession next year. In fact, the International Monetary Fund (IMF) and World Bank have warned nations to buckle up in preparation for a severe slump. And yet, relative calm seems to prevail when one looks at India and its markets. 

But despite the relatively balmy atmosphere in the Indian market, the startup ecosystem, on the heels of the current funding winter, is expected to face steeper challenges in the coming times. 

On the sidelines of Invest Karnataka Summit 2022, BW Businessworld’s Rohit Chintapali caught up with Nithin Kamath (Founder and CEO at Zerodha) to understand more about the recession fears and how it could affect the startups in the country. During the discussion, Kamath also discussed about the role of Karnataka as a business enabler in India and remote working.


You have operated out of Karnataka for over a decade now. How has the state done in terms of being a business-enabler?

With time, Karnataka is fast becoming a hub for people who want to start a business. I think it's mainly because of talent availability. We have gotten very lucky that we are able to attract good talent to the state. If I look back, one of the main reasons for Zerodha’s success is that we are based out of Bangalore. Because we were able to attract talent and retained lot of it in our business, our attrition is really low. In fact, our tech team attrition is almost zero. I don’t think we would have found the right talent that fit what we are culturally building at Zerodha in any other city.

Karnataka has done very well. They have always been very open to suggestions. The state has been very conducive for businesses to startup.

Wipro Chairman Rishad Premji recently spoke on how companies should try to reach out to talent beyond big cities rather than making them migrate, which puts unnecessary stress on infrastructure of these cities. What is your opinion on this?

Not every job fits for remote work but there are a lot of jobs that can be done remotely. For example, we have people who do ‘support’ work and they don't need to physically come to the office to work. The only question with remote working is – are you worried that the employees are not giving enough effort? But today, you have tools to track efficiency. If they can do their job in time and our customers are happy – work gets done. 

Rishad is also right. Because I do not think that all the metros of India are built to handle as many people. The cities are going to choke at some point. So, it’s very important to – wherever possible – nudge people to work remotely. 

Zerodha has an office in Belgaum. Almost a hundred people work out of this office and a lot of them migrated back from Bangalore. And they love it. Consider this, rupees one lakh salary in Bangalore versus rupees one lakh in Belgaum is exponentially different. They have a better quality of life – better air, food and much more. Lot of cities are already choking. I don't know what government can do to improve because there's only so much area, there's only so much room left for the roads to expand.

All indicators point towards a plausible recession. How will it affect Indian retail investors or people who want to get into investing?

There is no indication that there will be recession in India. If there were – stock markets would have reacted. 

So, you're positive about it?

I'm rationally optimistic because stock markets tend to do a good job of factoring in the future. If you see a price on a stock, it’s factoring in next three to four years of future. So, the stock market says that there isn’t going to be a recession in the next two to three years. 

But what’s happening in the US is scary actually. Will it have repercussions on India? Potentially. If US has repercussions, potentially Bangalore will be the most affected city. Because a lot of those outsourcing jobs are here. There is a risk, but somehow the economy is holding up and if you saw the last GST numbers, we are at our all-time high collections. Currently, it seems like India is insulated.

How do you see the startup ecosystem getting affected by this potential recession on the heels of funding winter?

The startup world was a bit excessive over the last five years because everyone was getting funded and it almost made it seem like anyone can build a billion-dollar business – which was not true. We were in a bull market. So, if something happens in the US, I think the startup ecosystem will get affected first. Because all the future valuation is really based on new investors bringing in money. And then new investors are the people located out of the US. Most of the money comes from there. If people tighten the purse there, the effect will be felt here. That's what you are seeing already as a lot of startups are letting go of people. They are trying to become more efficient and conserve money because they are all factoring in that the next two to three years would be very hard to raise new capital.

It's always been hard to build a business. Over the last three to four years, it seemed like it's easy to build, but it's not. So, we are back to reality. 

What are your opinions on crypto?

Personally, I don't understand crypto and have not applied my mind enough to understand crypto because it's not really in the regulated space in the country. If tomorrow crypto is regulated, maybe I will put my time and effort to figure it out. 

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