Zoho co-founder Sridhar Vembu has said India’s strong economic growth does not eliminate the need to manage foreign exchange reserves carefully.
He argued that a fast-growing economy often requires greater imports of energy, technology and machinery, making forex conservation important during the development phase.
Vembu’s comments came amid discussions over Prime Minister Narendra Modi’s appeal to citizens to avoid unnecessary gold purchases, foreign holidays and overseas weddings.
Questions had been raised over why such measures were needed when India had reported GDP growth of 7.8%.
Explaining the economic logic behind the appeal, Vembu said India is currently experiencing a growth phase similar to countries such as Japan, Taiwan, South Korea and China during their rapid development periods.
He said economic expansion increases demand for critical imports, especially energy and advanced technology. While India’s exports are growing, several export-oriented industries still depend on imported equipment, specialised materials, semiconductor components, processors and software.
According to Vembu, developing domestic capabilities in these areas will require time. He pointed out that East Asian economies took several decades to strengthen their technological base and reduce dependence on foreign suppliers.
“We have made a good start but we need time,” Vembu said, adding that India’s current approach focuses on conserving foreign exchange while building domestic manufacturing and technology capabilities.
He compared the situation to a growing company that needs to preserve capital to invest in future expansion. Similarly, he said India must manage its forex resources carefully while investing in long-term economic growth.
Reducing external dependence remains a priority
Vembu said the need to conserve foreign exchange is not a permanent situation. As India develops stronger capabilities in advanced technologies and increases energy independence through domestic renewable energy solutions, external dependence could reduce over time.
He argued that high economic growth and forex conservation can exist together. A rapidly expanding economy may require more imports before domestic industries become capable of meeting demand.
