Why Are Private Equity Firms Looking Hard at India? Ask Warburg Pincus - Knowledge@Wharton
Why Are Private Equity Firms Looking Hard at India? Ask Warburg Pincus - Knowledge@Wharton
What has Warburg discovered in India during the last decade? Pathak lists the developments that are exciting investors like him: Foreign institutional investment has boomed (more than $12 billion in 2003-04) as curbs on foreign investment in Indian industries have been relaxed; there is a virtually open skies approach to investment from the United States; and gross domestic product has grown at rates between 6.5% and 8% in recent years. The volatility of the Indian rupee has been curbed and inflation has declined. "There are smart people running that economy," Pathak says.
Reasons for Cultural shift - locus of control
"There has been a complete change in the confidence level of people in India," he says. The "tipping point" here was the contribution of Indian information technology companies to averting a worldwide Y2K meltdown. Suddenly, India's small IT companies went global, and the government -- long accustomed to regulating big industry but unfamiliar with IT -- had nothing to do with it. Now "most people believe they will not let government get in their way," Pathak says, "and that's why we keep putting money there."
There's a swagger in the step of India's business, and the country's government is showing signs it has caught the contagion, Kaye says. According to a 2003 Goldman Sachs report, "India's economy could be larger than all but the U.S. and China in 30 years." It's a prediction that doesn't appear far-fetched to Kaye and Pathak.
In India, Kaye and Pathak expect the thirst for capital will be unquenched for years to come. Just infrastructure improvements -- greater power generation, better highways and more efficient ports -- are estimated to require $20 billion to $25 billion in investments each year. For policy makers in India, Kaye says, the main social challenge is to lift 200 million people out of abject poverty. Infrastructure projects, far more than IT, have the potential to generate the large numbers of jobs needed to accomplish that task, he adds.
What has Warburg discovered in India during the last decade? Pathak lists the developments that are exciting investors like him: Foreign institutional investment has boomed (more than $12 billion in 2003-04) as curbs on foreign investment in Indian industries have been relaxed; there is a virtually open skies approach to investment from the United States; and gross domestic product has grown at rates between 6.5% and 8% in recent years. The volatility of the Indian rupee has been curbed and inflation has declined. "There are smart people running that economy," Pathak says.
Reasons for Cultural shift - locus of control
"There has been a complete change in the confidence level of people in India," he says. The "tipping point" here was the contribution of Indian information technology companies to averting a worldwide Y2K meltdown. Suddenly, India's small IT companies went global, and the government -- long accustomed to regulating big industry but unfamiliar with IT -- had nothing to do with it. Now "most people believe they will not let government get in their way," Pathak says, "and that's why we keep putting money there."
There's a swagger in the step of India's business, and the country's government is showing signs it has caught the contagion, Kaye says. According to a 2003 Goldman Sachs report, "India's economy could be larger than all but the U.S. and China in 30 years." It's a prediction that doesn't appear far-fetched to Kaye and Pathak.
In India, Kaye and Pathak expect the thirst for capital will be unquenched for years to come. Just infrastructure improvements -- greater power generation, better highways and more efficient ports -- are estimated to require $20 billion to $25 billion in investments each year. For policy makers in India, Kaye says, the main social challenge is to lift 200 million people out of abject poverty. Infrastructure projects, far more than IT, have the potential to generate the large numbers of jobs needed to accomplish that task, he adds.
posted by dave at
3:46 AM
0 Comments:
Post a Comment
<< Home