Economies become what they finance. When Spain and Portugal poured their fortunes into maritime expeditions, they didn’t simply build ships; they built a seafaring civilisation of navigators, shipwrights, and oceanic infrastructure. Japan’s patient, long-horizon capital in the 20th century didn’t merely support factories; it embedded precision, quality, and industrial discipline into the national psyche.
The Dutch and British investors who backed the East India Company weren’t just chasing returns; they were underwriting the architecture of the colonial empire. Superpowers understand this intuitively: their strength comes not from funding any one sector, but from underwriting entire ecosystems—industry, culture, sport, technology, space and services.
In the end, capital is destiny. What you choose to fund determines what you have permission to become.
On the supply side, capital arrives in phases – each with a purpose, a risk appetite, and a worldview.
# Government capital comes first. Its role is to absorb structural friction: costly land acquisition, immature supply chains, patchy logistics, and uncompetitive trade environments. It exists so domestic industries can at least start from the same line as global competitors.
# Banks follow. They price stability and predictability. They don’t care for ambition, they underwrite cash flows – hard, repeatable, and durable.
# Public equity markets sit a step further out. They apprise potential and will tolerate uncertainty, but only when it signals a credible path to sustained earnings growth. Volatility is accepted only if it is in service of future cash flows.
# Private equity lies beyond: capital designed for intervention. It finances transformation, restructuring, and reinventions that turn potential into performance in a timebound manner.
# At the frontier sits venture capital. This is capital for audacity – ideas without proof, innovation before product-market fit, and blitz-scale market capture that prioritizes speed over conventional brick-by-brick buildout.
Together, these are more than just funding. They are signals – expressions of sentiment about the nation’s future. The evolving structure of the capital stack in an economy thus becomes a mirror to the changing psyche of the economy.
In the three decades after World War II from 1950s-80s, there was massive regeneration effort across the globe. Japan, Korea, Taiwan and other south-east Asian countries invested in building scale, driving technology, and pushing manufacturing and industrialization.
India’s post-Independence era, by contrast, was a period of structural deprivation — an economy that braved a traumatic childhood with shortages of nutrition (capital), affection (enabling regulation), and stymied growth (ability to scale).
In this Nehruvian/Indira era, India’s capital system was progressively nationalized and brought under government control.
* 1956 – 245 private life insurers nationalized to create Life Insurance Corporation of India.
* 1969 – 14 major commercial banks nationalized that represented 80% of assets
* 1972 – 107 private general insurers nationalized and consolidated
* 1980 – 6 more banks nationalized; 90% of banking assets under government control
Ironically, the government-owned banks deprived the Indian businesses of funding, citing lack of steady cashflows – yet the biggest impediment to steady cash flows was the government itself!
The infamous ‘Licence Raj’, a draconian form of governance, allowed the government substantive powers from 1951–1991. The businesses needed government permission — often multiple layers of it — to start a company, expand capacity, change product lines, import equipment, or even shift location. The State controlled entry, scale, pricing, production, and in many cases, technology and foreign collaboration. Add to this complex taxation, rigid labour laws, and poor infrastructure — high logistics costs, expensive land, unreliable power—and the cost of doing business skyrocketed.
Unsurprisingly, this system of (mis)governance fostered rampant corruption and rent-seeking. Above all, it choked the two most formative and critical sources of supply of capital.
In post-independence India, private enterprises were more like cockroaches that refused to die than heroes of nation-building.
How did they survive?
Value chains evolved such that the player with the leanest capital structure captured most value while the asset owners were the most vulnerable to political interference.
Highest capital expenditure sectors and long lead time projects were left for the Government-owned enterprises – think coal, power, oil exploration, gas, steel, aluminum, railways, defence and aerospace. Private players favored fast moving consumer goods and short-cycle industrial products and automobiles.
If capital is the protein of business, Indian firms adapted to a low-protein, vegetarian diet. Capital management became an entrepreneur’s core survival skill.
Consequences:
Most firms never scaled:
* Quality gave way to ‘chalta hai’ (make-shift acceptance)
* Continuous innovation replaced by ‘jugaad’ (quick fixes)
* Brand building sacrificed for debilitating price wars
* Talent development substituted by loyalty and nepotism
Amongst firms that did scale, many became mere assemblers and distributors of products while importing the true lynchpin of their business. Examples below:
- Page Industries imported the brand from Jockey
- Maruti Suzuki imported manufacturing process technology from Suzuki
- Timken India, SKF India imported product technology from their parent company
- Sun Pharma, Dr. Reddy’s rely on R&D of innovator pharma companies
- Samsung & LG import key product design from their parent company
A select few firms transformed into capital-efficient powerhouses - the ‘cows’ of capitalism. Much like cows that consume vast quantities of low-value grass and, through microbial fermentation in their stomachs, convert it into high-quality protein, these companies master the art of processing high-volume, low-margin sales into substantial internally generated capital. E.g. Asian Paints, Pidilite.
The IT boom brought companies like TCS and Infosys to global scale — not because software talent was abundant (it was), but because software is not capital intensive. A group of middle-class founders could start and scale Infosys to global standards.
All that is changing. Today, the prison gates are unlocked.
Over the last decade, India has simplified taxation, reformed land acquisition, built highways, ports and digital infrastructure, consolidated labour laws, lifted foreign investment limits, and opened ring-fenced sectors like defence to private capital. Banks have repaired balance sheets and, for the first time in a long time, appear willing to lend without flinching. State governments, once allergic to factories, now compete like sales teams. — yet private capex remains stubbornly tepid.
Despite bold investments by Reliance, Adani Group, Bharti, Larsen & Toubro, Murugappa Group, JSW Group, and Aditya Birla Group, many players – especially SMEs – remain unable to transform. They lack deep research ability, technology muscle, and the managerial talent to expand.
Their dependence on China for essential machinery, materials and know-how is not a matter of preference but debilitating vulnerability. Talent shortages at senior and mid-levels are real. Second-generation business scions often lack the hunger of their parents — preferring comfort over expansion risk.
Even macro risks abound. Globalisation seems to be reversing. Closer to home, a single election outcome could swiftly unravel the current pro-business climate. Some reticence to take long-term bets is justified.
Traditional FMCG can’t absorb much more capex because population growth has flattened. And even in high-growth categories like appliances and smartphones, Indian firms mostly assemble imported components rather than build them—so the capital intensity just isn’t there.
Much of the start-up momentum has been concentrated in fintech—Paytm, Pine Labs—or in operationally complex service businesses such as Swiggy, Nykaa, PB Fintech, Lenskart and others. These models do not demand large-scale manufacturing investments, so they don’t translate into meaningful capex cycles.
Even in sectors where there is lot of activity, the scale is just not there. Take power: India’s largest solar module producer, Waree Energies, has just ~20GW of capacity, while Chinese players like LONGi Green and JinkoSolar operate at 100GW+. This scale disparity is compounded by reliance on China for critical components and technology. So, even when capacity is being put up, all the value-addition is not happening in India, for now. India needs to build the entire ecosystem from polysilicon to panels.
Lithium-ion batteries tell a similar story. Exide leads domestically with 6 GWh and plans to double capacity, while Ola Electric and Amara Raja target 20 GWh (FY27) and 16 GWh (FY30) respectively. India may reach ~100 GWh next year – but China already stands at ~6,300 GWh. Market leaders CATL and BYD alone command ~700 GWh and ~250 GWh, underscoring the gulf in investment and industrial depth.
Another area seeing rapid growth globally – foundational technologies – AI models, semiconductors, advanced materials – Indian firms are barely present. The issue is not a lack of talent; nearly 20% of the world’s semiconductor design engineers are Indian. The issue is capital. These industries require deep pockets and patient capital, and that pool remains shallow in India.
The sectors shaping the future – Artificial Intelligence, Robotics, Space – are capital-intensive by design. Add to that the shift to electrification, where power becomes the new oil, and the need for large-scale investment becomes even more urgent.
India doesn’t have the financial muscle and execution talent to pursue this level of scale, today.
Many of India’s persistent problems stem from government action—or inaction. Government’s execution capacity remains constrained. Consider the urgent need for fighter jets: yet Hindustan Aeronautics Limited, a majority government-owned company, is running two years behind schedule, creating ripple effects that stall private suppliers across the defense ecosystem.
Cleanliness offers another stark illustration. Despite India’s aspirations for global leadership, waste management remains a national embarrassment. Entrepreneurs attempting to manage municipal garbage, recycle waste, or clean streets repeatedly run into systemic hurdles: contracts are awarded and revoked arbitrarily, payments are delayed, and corruption or bureaucratic friction frequently derails execution.
These systemic inefficiencies discourage private investment and prevent capital from flowing into any sector that interfaces with the government.
The chorus is getting louder. Investors want higher capex and faster earnings growth. Commentators demand scale. Tariff hikes and border tensions are interpreted as tests of national pride. And every climb in the global GDP rankings is hailed as India’s arrival on the superpower stage.
But nation-building isn’t theatre, and reinvention isn’t instantaneous. We need patience. Corporate India’s low-capital DNA – shaped over decades – cannot be rewritten in a single cycle. Before we demand world-class outcomes, we must first address two foundational deficits:
* Talent: R&D capability, core engineering, process discipline, quality systems, and modern managerial depth.
* Risk capital: Patient capital for innovation, moonshot R&D, and support for subscale enterprises until they reach commercial viability.
For seventy years, misgovernance, policy volatility, and corruption suppressed ambition and scale. If Corporate India is expected to compete globally today, it is fair that the State helps level the playing field. The government has made major strides—but to truly catalyze a new corporate DNA, a few critical interventions remain:
1) Encourage Risk-Taking
- Enable personal bankruptcy and “fresh start” provisions so entrepreneurs are not financially ruined for trying.
- Revisit long-term capital gains taxes to reward long-duration, high-risk investment rather than penalize it.
2) Build Talent, Not Just Infrastructure
- R&D Ecosystem: Incentivize world-class research centres, attract top faculty, and seed deep-tech innovation.
- Project Funding: Back R&D in sectors where India lags – AI, robotics, healthcare, semiconductors, advanced materials.
- Technical Training: Establish high-quality training institutes in construction, manufacturing, and process engineering to bridge the chasm between theory and shopfloor reality.
3) Modernize Governance
- Domain Expertise: Specialized ministries must be led and staffed by professionals with expertise in their sectors – AI, semiconductors, healthcare, urban planning, energy.
- Accountability: Performance systems need teeth. If 90% of officers are consistently rated “Outstanding,” the metric has lost its meaning.
For the impatient onlookers—investors, analysts, commentators: have faith and hold your nerve.
India has reformed the environment. But it has not yet reformed the organism. Capital is available. The prison door is open. But a nation trained for 70 years to survive on scarcity cannot wake up one morning and behave like it was bred for scale and global dominance.
This is not an economic transition. It is a psychological jailbreak.
In Warren Buffett’s words: “You can’t have a baby in one month by getting nine women pregnant.”
Population-scale transformations obey the laws of nature, not the impatience of markets. Rewriting Corporate India’s DNA isn’t impossible—it’s just not instantaneous.
(Sachee Trivedi is the founder of Trident Capital Investments – an Indian public equities FPI fund. She lives in Luxembourg.)
Views are personal, and do not represent the stance of this publication.
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