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Global Reach
Private equity and venture capital investment in India began in earnest in 1996–97 with expansion
of the IT, telecom and Internet sectors. Combined venture/private equity investment totaled $20
million in 1996, increasing four-fold in the following year to $80 million. Simultaneous with the
global tech boom, a high point was reached in 2000, with 280 deals valued at $1.16 billion. Most of
this activity was in the IT services/software sector and was related to Y2K business.
With the tech crash in the U.S., deals fell in number to 110 in 2001; the number of early-stage
deals declined to 36 from 142 (although average deal size doubled from $4.14 million to $8.52
million); and the number of late-stage and private equity deals fell from 138 to 74. Investments
in Internet companies declined from $576 million to $49 million. Investment reached a low point
in 2003 but since 2004, deal activity has returned in full force.
Inward Foreign Investment in India, 2004-08 ($ billions, U.S.)
2004–05 2005–06 2006–07 2007–08
FDI 3.75 5.5 15.7 24.5 (+56%)
PE/VC* 1.65 2.2 7.47 14.23
(# of deals) (71) (146) (302) (387)
Venture Capital* n/a .268 .508 .543
(# of deals) (44) (94) (98)
Key Sectors:
Mobile/Web Services; IT/BPO; Business and Financial
Services; Health Care/Life Sciences; Media/Entertainment;
Real Estate/Infrastructure; Manufacturing; Cleantech.
Source: Ministry of Commerce and Industry; U.S.-India Venture Capital Association/Venture Intelligence.
* Totals are for calendar years 2004 through 2007.
In the first five months of fiscal 2008-09 (April-August), FDI in India totaled $14.8 billion, suggesting
a possible slowdown and raising the question of whether India was still likely to meet the
government’s forecast of $35 billion in FDI for the fiscal year. Still, India’s investment environment
remains dynamic. A report released in September 2008 by the United Nations Conference on
Trade and Development (UNCTAD) continued to list India among the most attractive FDI markets.
A June 2008 survey by Ernst & Young placed India fourth in terms of attractiveness as an
alternative business location—after China, Central Europe, and Western Europe, and ahead of the
U.S. and Russia.
Venture Capital Arrives
Among its advantages for Western multinationals, India is English-speaking; its legal system is
well-established and based on the British system, with well-trained judges and lawyers and, while
less than efficient, is relatively free of corruption; and corporate governance and accounting
practices are relatively transparent.
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