With a sustained GDP growth of over 8%, India, the world's second fastest growing economy after China, has changed into one of the most dynamic emerging markets in the world.
India is currently witnessing an unprecedented growth cycle. Economic growth of 8.2% over the past three years, compared with 6.2% in the preceding ten years, puts India much above the 5.3% growth rate of other emerging ASEAN countries.
It is positive news on all parameters. A statement better illustrated by the industrial production which grew over 10% last year, manufacturing which clocked a record growth of 11.2% and exports which is averaging 25% annual growth over the past three years.
Certainly India is on the move and in the right direction.
Lured by the inherent strong macro-economic fundamentals, equity inflows from international investors this fiscal, is expected to cross $11 billion, more than double the $5.5 billion that came in last fiscal.
Cumulatively, over the past three years, India has received capital flows of $72 billion against $28 billion in the preceding three years. Foreign exchange reserves in the country are now over $175 billion.
Brand India is surging ahead. And, leading the march are the new wave of small entrepreneurial firms that are putting India Inc., on the global map. Akin to what Wipro and Infosys, the first wave of entrepreneurs who created global software development firms did.
Unlike the past where entrepreneurship was limited to technology related service firms, the second wave spans several sectors like auto, pharmaceuticals, healthcare, and energy among others. This indicates a sustainable and broad-based growth.
Among this second wave of entrepreneurs are many Indians returning back to their homeland to leverage on the engineering talent, labor-cost advantages, and a thriving market.
India is now acknowledged as an innovative hub across different levels of business and technology - a fitting destination for investment.
Little surprise therefore the 230% jump in Private Equity (PE) investment in 2006. PE funds pumped over $7.46 billion into the country in 2006, up from $2.26 billion a year earlier. Over 299 deals were consummated in the traditional Information Technology sector, where India has carved a name. A variety of other sectors like auto components, real estate, infrastructure, pharmaceutical, media and food and beverage have also attracted significant investor attention.
An interesting dimension in the deal flow is the steady growth of early-stage venture funding. In the first half of 2006 nearly 48 early-stage deals attracted $ 238 million, compared to 20 deals which raised $196 million in 2005.
Indian startups are clearly maturing. Many are focusing on serving the domestic market which is booming. Picture this, India is expected to add around 85 million new mobile subscribers in 2007, taking the total subscriber base to over 220 million by end of 2007. With its large and growing middle class population of nearly 300 million, (more than the population of the U.S) displaying a big propensity to spend, India is turning out to be a dream market for products and services.
According to McKinsey & Company, per-capita income in India has doubled in the last nine years, and the number of households earning an annual income of over $10,000 is rising more than 20% percent a year.
India today, can boast of markets, capital and entrepreneurs driving innovation - three crucial factors that create jobs and enable wealth creation. However many issues regarding infrastructure and Government policies still remain to be addressed.
The good news is that India's leadership having recognized the shortcoming is working on ways to resolve them. With a strong public / private partnership the Government is preparing to tackle urgent issues such as energy and infrastructure.
With the key elements of an innovation ecosystem falling in place, India clearly is at a tipping point. We, at IndoUS Venture Partners (IUVP) are strong proponents of the India opportunity and are dedicated investors committed to enhancing the Entrepreneurial eco-system.