'Why is it not happening in India?': Aswath Damodaran asks why US tech thrives while Delhi lags

India must ask why its tech sector isn’t producing global mega-cap giants, says valuation expert Aswath Damodaran, urging policymakers to fix what he sees as systemic obstacles holding back innovation.

In a podcast with ETBFSI, Damodaran compared India’s startup ecosystem to the U.S., which he described as “unique” for enabling tech companies to scale rapidly from obscurity to trillion-dollar valuations.

“Europe has no great tech companies. Latin America has no great tech companies. Canada’s maybe got a couple — Shopify, maybe Spotify in Europe — but the U.S. is different,” he said, pointing to companies like Facebook, which hit a $2 trillion market cap in just over a decade. “There’s something in the process that allows that to happen in the U.S. but doesn’t seem to allow it to happen elsewhere.”

Damodaran challenged Indian regulators to confront this disparity head-on.

“If I were an Indian rulemaker… the question I’m asking is: what is it that will allow a small unknown company with a great technology to become a large mega-cap company over 15 years?” he asked. “And why is it not happening in India?”

Rejecting the notion that talent is the issue, Damodaran noted that many Indian-led firms succeed abroad. “Can’t be that we don’t have the brains,” he said. “It must be something in the system that’s getting in the way.”

He urged a reassessment of India’s structural barriers, suggesting that without reform, the country will struggle to create world-beating tech firms. “If India wants those five of the top 10 companies — or three of the top 10 companies — to be young Indian companies that have come out of nowhere and shot to the top, that part of the process has to be fixed,” he warned.