'I would love to see this generation be hungry for success, build operational businesses': Uday Kotak

Uday Kotak, founder of Kotak Mahindra Bank, expressed apprehensions regarding the future of India's economy due to a waning enthusiasm for entrepreneurship, which he refers to as a decline in economic 'animal spirits'. He cautioned against a diminishing entrepreneurial zeal among younger business families who are increasingly inclined towards investment management over active business operations. 

Speaking at Kotak Institutional Equities' investor conference, Chasing Growth 2025, Kotak pointed out a significant shift in mindset among young business heirs. "What concerns me is that many in this generation are taking the easy way out, especially in the post-Covid world. They claim to be managing family offices and investments, trading in the stock market, allocating funds to mutual funds, and treating it as a full-time job," he said.

He added: "If someone has sold a business, they should be thinking about starting, buying, or building another business.  Instead, I see many young people saying, 'I'm running my family office. They should be creating real-world businesses.  Why not start from scratch?" 

Kotak raised questions about why individuals aged 35 or 40 were not directly contributing, despite recognising the significance of startup funding.

"I would love to see this generation be hungry for success and build operational businesses.  Even today, I firmly believe that the next generation must work hard and create businesses rather than becoming financial investors too early in life."

Rising stock valuations

He also voiced apprehension about over-financialisation in the Indian economy. He warned that over-reliance on financial instruments could potentially harm the economy, as uninformed investors pour their savings into equities without considering their true valuations.

"Should we continue encouraging retail investors to keep buying? Retail investors in India are funneling money into equities daily, contributing to domestic institutional flows.  Money from individuals from Lucknow to Coimbatore is flowing to Boston and Tokyo," he said, noting that foreign companies were taking advantage of high valuations to book profits and repatriate funds.

According to Kotak, the US dollar is behaving like a vacuum pump, draining capital from emerging markets due to the rise in US Treasury yields exceeding 4.5%. Indian stock valuations continue to be notably higher than the majority of global markets.

He emphasised that there has been a shift in the dynamics of capital flows, signaling a need for adaptability in the economic landscape. He further emphasized that India must steer clear of protectionist policies and instead focus on leveraging the changing global market conditions to enhance the competitiveness of the Indian industry.

The Economic Survey for 2024-25 also highlighted over-financialisation and observed that such a phenomenon has resulted in unprecedented levels of public and private sector debt in developed economies.