Fueling India’s Growth
Private equity investments have been a part of India’s emerging story for about a decade in which time we
have seen a multitude of events that have shaped the investment climate in India. The country’s growing global stature, a far more open economy coupled with positive indications of reforms and perception of value residing within the fabric of the economy, encouraged investments into the country. Such enabling factors combined with global macroeconomic cues powered India’s GDP growth rate to over 9% in 2005.
Thereafter the last decade also saw a complete reversal in optimistic sentiments around the world due to the 2008 subprime crisis in the US. Events including European sovereign debt crisis at the start of the second decade has made investors across the globe more wary of investing. As global economic growth slowed, India was not immune to the downturn.
That combined with domestic factors such as interest rate environment, caution in policy notification and revaluation of regulatory framework have led to a patient ‘wait and watch’ attitude amongst all classes of investors including private equity investors.
As we progress into this decade, we need to reflect on lessons learnt and understand investor sentiments in order to leverage on opportunities that lie ahead. Despite the global conditions, domestic political instability or unfavorable policy decisions, the Indian domestic consumption market coupled with a growing entrepreneurial cadre, still holds an allure for PE investors.
It is therefore up to the Indian policy makers / Government to give the right message to investors for enhancing funds flow into our economy. For India to spur its growth rate back above 9%, PE investment is important. This thought paper is an effort towards understanding the trends in Private Equity (PE) investments across the last decade and those likely to emerge in the near future.