Why isn’t India producing a homegrown rival to ChatGPT, minting a chipmaking giant like Nvidia, or designing airborne electric vehicles?

For a nation boasting some of the world’s premier engineering talent, the absence of bleeding-edge, deep-tech innovation is a glaring puzzle.

The usual suspect is a lack of R&D spending, which languishes at a mere 0.8% of GDP.

But an insightful discussion I had last week led me to frame the problem differently.

A Broken Supply Side

During an investor meet organised by SBI Mutual Fund and Amundi, the French asset management giant,I sat down with the founders of three leading consumer internet companies: Urban Company, Ixigo, and Meesho.

I asked Abhiraj Singh Bhal, the founder of Urban Company, what drove him to start his business.

He told me about moving back from Singapore in 2014, freshly married and settling into his first home after a stint at Boston Consulting Group.

His wife gave him a simple task: hire a carpenter to hang some paintings.

The first carpenter he tracked down via an online directory ghosted him. The second never showed up.

The third arrived empty-handed, claiming he was only there to "survey" the job and would return the next day.

What struck Abhiraj, he told me, was the profound market failure staring him in the face.

He had dollars to spend, but unlike other industries where products aggressively compete for your wallet, the local supply side was structurally broken.

That frustration birthed Urban Company, earlier Urban Clap, a digital bridge connecting consumers with a reliable supply of home services.

I realised this story repeats itself across the subcontinent's digital economy.

Why Brilliant Minds Go Local

Aloke Bajpai pivoted his expertise from the European travel-tech giant Amadeus to found Ixigo in 2006, bringing order to India’s chaotic travel-booking market.

Meesho, launched in 2014, organised a highly fragmented supply chain to become an e-commerce behemoth.

Its CFO, Dhiresh Bansal, told me that the platform now accounts for roughly 40% of all e-commerce shipments in the country.

What do these ventures have to do with deep-tech innovation?

Actually everything.

The founders driving these platforms are the innovation agents of our era.

Almost universally, my panelists and their extended top deck held degrees from the elite Indian Institutes of Technology (IITs).

Skeptics often sneer at this allocation of human capital.

Why, they ask, are elite engineers optimising the 20-minute delivery of hot idli-vada while Silicon Valley builds world-conquering LLMs?

The answer is that the smartest minds often gravitate toward the most immediate, glaring inefficiencies in their environment.

Our brightest engineers are effectively compensating for the failures of the Indian state.

They are forced to build complex software including some of the most sophisticated payment systems in the world merely to bypass decaying urban infrastructure, unreliable supply chains, and a profound deficit of trust in basic services.

Governance Before Gigabytes

If you ask me what India should fix to spur innovation, I would point to our daily realities.

While many engineers are now undeniably building space tech, drone tech and AI tools, even others are still solving for existence, like in payments.

Obviously there is no venture capital waiting to fund some of these challenges, though garbage and climate are seeing investments, in some lateral ways.

But it is tough to dream up the next generation of artificial intelligence when your daily reality involves navigating unbreathable air, garbage-strewn and potholed ridden streets, broken pavements and the labyrinthine, often-abused challenge of simply doing business.

Yet, rather than addressing these foundational deficits, the government is increasingly tempted to play venture capitalist, deploying taxpayer money to subsidise risky startups.

While there may be strategic logic in funding certain sectors, it is largely a misdirection of focus.

It is less about a lack of funds and more about a lack of mindspace.

It has long been my case that India cannot become a developed, AI-driven superpower if its citizens are still battling 20th-century urban squalor.

We have the smart capital and the smart brains.

We have to fix the physical environment and the basics of daily life.

Once the state clears the path of everyday friction, our entrepreneurs will naturally raise their gaze to the future.