The pandemic has played out very differently in different parts of the world. Steps taken in response to the pandemic – both healthcare response and economic response, has also varied considerably. India had a very stringent healthcare response which allowed time for infrastructure development, facilitating better healthcare when the number of cases started increasing. But the fiscal response of India has been highly controversial, especially domestically.
India’s fiscal response has been viewed by many as inadequate. Relief in the form of extended moratoriums and availability of credit left Indian entrepreneurs wanting for more. However, Charles Kaye, CEO, Warburg Pincus, shared a different perspective when speaking at The Economic Times Global Business Summit:
“India’s fiscal response played better than what I thought in the beginning. It has essentially used that mechanism and managed through and now we are seeing across a wide variety of businesses… recovery coming on the back of release of the restrictions themselves and that is propelling growth.
We are sort of right at that moment in time where we will begin to see the normalization in credit markets take place and as the healthcare dimension will still continue to play – the more important question will be how can India restore itself to a growth path.”
Indeed, India’s story revolves around growth and that is what pulls foreign investors to the country. The pandemic has dented the Indian growth story phenomenally and in order to bounce back, the Indian economy needs a deluge of funds. Private equity investors form an essential source and conduit for distributing this money into the Indian economy, but the question is are they willing.
The rise of a new generation of Indian entrepreneurs has attracted private equity investors to India. The past two decades have been hugely transformational for India’s small and medium businesses. The old stereotype of privilege being the sole incubator of entrepreneurship had been broken and new successful businesses empires were established by Indians who just had talent and a great idea.
Considering that this new breed of Indian entrepreneurs and the several advantages offered by the Indian domestic market were the magnets for gravitating private equity investors, there is no reason to believe that they will shy away now.
Moreover, private equity investors are in a better shape today than in 2008-09. They possess the funds and are waiting for the right opportunity. Of course, there is hesitation due to pandemic led uncertainties, but as the sky clears up on that front, private equity is expected to become active again. Kaye elucidates the sentiments of the private equity investors very well:
“If I compare the India of 1995 and today, the change is remarkable… India has all the powerful tailwind in demography and so much else but that’s not destiny, it’s not foreordained, it requires continued vigilance and significant action to continue to take advantage of that opportunity…
I think it’s hard to imagine what scale of the future may be. We have got an extraordinarily talented group of people in India and a remarkable ecosystem of entrepreneurs. India is going through a fair bit of change and disruption at the moment and what comes next is unclear and uncertain but what’s apparent to me is that it will create opportunity for people like us that are prepared to provide real risk equity capital… and our capacity to invest in India is substantial.”
All the indicators for India Inc are thus quite positive. It appears that one can safely say that the worst is over and now is the time of action. As Kaye underlines, nothing is preordained, it all depends on how the government and businesses work together to solve the internal issues swiftly and reveal the awesome new opportunities of growth that investors can’t ignore.