India a New Favorite for Private Equity

Posted by: Bruce Einhorn on May 28, 2008

For as long as I can remember, China has attracted most of the foreign direct investment in Asia, with everybody else fighting over the scraps. An item from India’s Economic Times yesterday indicates that the situation is starting to change. (BTW, the Indian newspaper is one of BW’s content partners, which means we run some of its stories on our site; hence the BW link.) According to the report, by a firm called Four-S Services, India received $19.5 billion in private-equity investment last year, compared to $12.8 billion for China. Unclear how much of that was foreign, but it does indicate that India is becoming more of a draw for overseas investors. Crows the Economic Times: “Indian PE performance rocked last year mainly due to the fact that there are more private enterprises in India than in China that are attractive to PEs. Though India has always had a higher percentage of private sector companies compared to China, it is only in recent years that there has been a spreading of awareness among the investing community of the strong education system, English language proficiency, legal & financial structures and democratic governance in the country.”

In the overall competition for investment, China definitely still is in the driver’s seat. FDI last year soared 13.8% to $82.7 billion. (See this report from the U.S. China Business Council for more on China and FDI.) And India? The good news is FDI tripled in 2007. But even with that impressive growth, the total amount of FDI was $16 billion. Not bad, but certainly not China numbers. And given the Indian government’s hopes to fix the country’s vast infrastructure problems, India needs a whole lot more than $16 billion.

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