[Economics] $600 billion PE/VC funding vital to help India achieve $5 trillion economy by FY27, claims report

[Douma]

As per the report, titled ‘India Investments Pulse 2022’, the country requires a total PE/VC contribution of $4.7 trillion in the next five years to reach the $5 trillion GDP target.

 

Private equity (PE) and venture capital (VC) funding is expected to play a key role in India's ambitious target of achieving a $5 trillion economy by 2027, as per a new Praxis India report. 

PE/VC investment in the country is projected to reach a total of $600 billion over the next five years, contributing approximately 13 per cent of the total investment required to reach the $5 trillion GDP mark. As per the report, titled ‘India Investments Pulse 2022’, the country requires a total PE/VC contribution of $4.7 trillion in the next five years to reach the $5 trillion GDP target. 

With $2.05 trillion, government investments is estimated to be the leading contributor ( 44 per cent) to this target followed by $700 billion from corporate retention (16 per cent), $600 billion from PE/VC (13 per cent), $600 billion from other sources (12 per cent), $550 billion from corporate debt (11 per cent), and $200 billion from IPOs (4 per cent). The PE/VC contribution to Indian economy was $210 billion between FY17-22, which was 9 per cent of the total investment made during the period. 

 

“PE and VC have injected more than $300 billion of capital into India in the past 13 years, providing several companies with a vital new funding source. PE/VC is fast becoming the preferred choice of capital for entrepreneurs providing strategic guidance and assisting in the operational turnaround of their respective businesses. As the Indian economy continues on this robust growth path to achieve ambitions of a $ 5 trillion economy, PE/VC funding of $ 600 billion will be required, and this will emerge as one of the largest asset classes in the market," Madhur Singhal, Managing Partner and CEO, Praxis Global Alliance told Business Today. 

On a yearly basis, the share of PE/VC investment to country’s GDP stood at 1.2 per cent in 2022 as against 4.9 per cent in the US. This number is expected to increase to 3-3.5 per cent by 2027 with estimated investment of approximately $150-170 billion, the report says.

The PE/VC industry has been a significant contributor to India's economic growth, with investments flowing into various sectors such as e-commerce, healthcare, fintech, and renewable energy.  PE/VC funds invested U$41.3 billion in 2022 across 1,358 deals, which was 44 per cent lower from the previous year, the report said. Average deal size reduced by more than 50 per cent compared to the frenzied funding period of 2021. This also marked an end to a 10-year bull run that has endured since 2012 (with a brief decline in 2016). Despite this, 2022 remained the second-best year for Indian PE/VC investments till date. According to the report, healthcare, SaaS, climate tech, and BFSI are expected to become more attractive this year for PE/VC investments. 

https://www.google.com/amp/s/www.businesstoday.in/amp/entrepreneurship/news/story/600-billion-pevc-funding-vital-to-help-india-achieve-5-trillion-economy-by-fy27-claims-report-378637-2023-04-24