'Japan was first to suffer': Zoho's Sridhar Vembu warns against 'seductive' financial bubbles

As 2025 draws to a close, Sridhar Vembu, founder of Zoho, has offered a wide-ranging reflection on India's economic journey since Independence, warning that an overreliance on financial speculation and bubble-driven growth could derail the country's long-term potential.

In a year-end note, Vembu traced India's post-Independence economic choices, beginning with central planning. "Post-Independence, India flirted with Soviet style central planning and fell into the degeneracy of the License-Quota Raj," he wrote on X.

He linked that period to both political and economic consequences, saying, "Politically, this led to the Emergency, a thankfully thwarted attempt at dictatorship. Economically, it unleashed corruption on a vast scale, and that is still with us."

Vembu then turned to the reforms of the early 1990s, describing how India pivoted under pressure. "In 1991, under the threat of national bankruptcy, we embraced globalization and the Washington Consensus," he wrote, adding that while the West's embrace of that model effectively ended with the Global Financial Crisis of 2008–09, "the nostalgia for this still persists in India."

The Zoho founder compared India's path with China's rise in the following decade. "The 2010s is when China made its ascent into economic stardom, as country after country had China as their number 1 trading partner," he wrote. He noted that China, like Japan and South Korea before it, "did not buy into the Washington Consensus, except as a way to gain export markets while they built up domestic capabilities."

According to Vembu, the global economic order shaped by that consensus has now faded. "Today, the Washington Consensus is only a fading memory, with institutions like the WTO dead and buried," he wrote.

Looking ahead, the veteran software entrepreneur said India's biggest advantage lies in its people. "Where does India go from here? Our strength is that we have the latent talent, raw youthful energy, to be the authors of our own economic destiny," he said.

However, he flagged two major risks. "The dangers I see are two-fold: addiction to financialism and destructive political discourse that delights in tearing things down than building things up," Vembu wrote.

Warning specifically against asset bubbles, he said, "We cannot risk igniting financial bubbles and that is a real risk because a financial bubble is very seductive and it is very easy to celebrate it as 'growth'." Drawing a parallel, he added, "Japan was the first to suffer this addiction and in a sense Japan has never really recovered."

The billionaire tech entrepreneur argued that real progress requires focus on fundamentals rather than speculative gains. "To truly achieve our potential, we need to channelise our youthful energy towards building up core capabilities across the diverse array of sectors that constitute the modern economy, without getting distracted by bubbles," he wrote.

Despite the risks, he expressed cautious optimism. "I am optimistic that even as some of us lose ourselves to financial speculation, there are enough of us to stay grounded and focus on the long term," Vembu said. He added that cultural factors could help contain excesses: "Indian preference for gold and the inherent conservatism of the average Indian gives me hope that we will keep financialism contained."

On politics and governance, Vembu said his travels have left him encouraged. "On the political front, I meet so many people in my travels who are selfless patriots dedicated to service. Corruption cannot touch these people," he wrote, adding, "It is those people who give me hope."