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India’s private equity market has experienced significant growth in recent years. The average annual investment volume amounted to approximately $40 bn over the past five years, according to Schroders. However, investment volumes have declined from their 2021 peak, but this aligns with the global post-pandemic normalisation of deal-making activity, points out the asset manager.
“Private equity investments in India remain substantial, reflecting the continued interest and confidence of investors in the country’s favourable economic conditions and growth potential,” says Nils Rode, Chief Investment Officer, Schroders Capital.
The underlying factor driving investor confidence is India’s economic momentum. India has already emerged as the world’s fifth-largest economy in the World GDP Ranking 2024. It is forecasted to overtake Japan and Germany in 2027 to become the third-largest economy.
An expanding middle class, favourable demographics and rising disposable incomes further strengthen the investment case.
With a median age of just 28, India has a young and increasingly urban workforce. By 2030, 40% of the population is expected to live in cities, bolstering productivity and consumer spending. Additionally, India is projected to account for over one-fifth of tertiary-educated individuals across OECD and G20 countries by 2030, creating a skilled talent pool for businesses.
Manulife Investment Management highlights regulatory reforms as another catalyst for investment. The introduction of the Goods and Services Tax, foreign investment liberalisation, and the Insolvency and Bankruptcy Code have improved India’s business climate, enhancing transparency and reducing bureaucratic hurdles.
The booming tech start-up ecosystem is another compelling factor. India’s digital economy and the information and communication technology (ICT) sector are contributing over 13% to GDP and the government is aiming to grow the ICT sector to $1 tn by 2025.
“India has a tech workforce 10 times larger than that of the US, and each year adds 10 million graduates to its talent pool. The trends of demographic change, deglobalisation, and decarbonisation have fuelled India’s technology industry, especially in areas such as fintech and B2B marketplaces,” points out Schroders’ Rode.
Another growth sector is healthcare. It is expanding rapidly, particularly in pharmaceuticals and vaccine production. India plays a crucial role in the global supply of generic medicines, contributing 20% of total exports, while also manufacturing 60% of the world’s vaccines, according to Invest India. Several factors are driving this growth, including a vast and skilled workforce, shifts in global supply chains that reduce dependence on China, and government initiatives such as Production Linked Incentives and the National Biopharma Mission, which support industry expansion and innovation.
“By focusing on high growth sectors such as consumer, tech-enabled business services, and healthcare, we believe an investment strategy focused on India is not only attractive but also adds valuable diversification to a private equity portfolio,” Rode sums up.
