At $4 billion PE investments India outpaces China's $570 million in Q1 2008

Despite the slowdown in global venture capital investments, owing to a slowdown in global financial market conditions  (See: VC investments slow down in 2008)  private equity (PE) investments in India doubled to $4 billion in the first quarter of the calendar year 2008 compared to the corresponding period last year, maintaining its position as the most attrcative destination in Asia (excluding Japan) surpassing China that has recorded just $570 million in investments so far.

India had first surpassed China in attracting PE investments towards the end of the second quarter of the calendar year 2007 when it grossed $10 billion compared to China's $8 billion. During the same period in 2006 China had received $13 billion in private equity investments compared with $7 billion in India.

The equation has changed since then, with India well in the lead now, says market research and cross-border M&A advisory firm IndusView Advisors Private Ltd.

  • The Indian real estate and infrastructure sector has again been the key contributor to this increasing trend this year, emerging a favorite with 28 per cent share in value of all private equity investments at $1.12 billion
  • The power sector received about 13 per cent share of the pie with $520 million so far this year
  • Banking & Finance and Telecom sectors tied for the third most favorable sectors for investments with 8.7 per cent of the deals at more than $340 million each.

Globally, real estate and infrastructure fundraising by international real estate private equity funds, has been brisk, with as much as $130 billion raised over the last two, according to estimates. A large percentage of these funds raised are focused outside of the US for investing in emerging markets such as India and China.

''With the economic downturn in developed economies intensifying and the application of capital becoming dearer and pressurising the expected return on investments (RoIs); PE firms are finding their way in to safer investment heavens, that is, emerging markets which have decoupled from the developed markets.'' says Bundeep Singh Rangar, chairman, IndusView.

China will overtake the US by 2025 as the world's largest economy. China's economy is expected to continue to grow to become about 130 per cent the size of the US by 2050, according to estimates.

India will grow to almost 90 per cent of the size of the US by 2050, while Brazil is expected to overtake Japan by 2050 to move into fourth place. Russia, Mexico and Indonesia all have the potential to have economies larger than those of Germany or the UK, by the middle of this century.