Investors in India are set to enjoy the benefit of some solid reform initiatives over the next 3-6 months, before the politicians shift focus to on pleasing their constituents ahead of the 2014 elections.

Among these could be a more extensive credit market, including the burgeoning mezzanine market, according to private equity giant KKR (Kohlberg Kravis Roberts).

The PE firm has been planning to launch an India debt fund that could raise $1 billion.

Henry McVey, Managing Director and Head of Global Macro and Asset Allocation for KKR, has, in a report, described India’s bursting macro-economic potential and strong investment profile.

McVey, after visiting India, noted that it could achieve its full potential if three things can be addressed — adding investment in infrastructure; tackling of inflation and related challenges; and cutting subsidies to help balance the fiscal situation and restore proper consumption signals.

Bursting with potential

He has noted that any weakness in 2013 is set to create an opportunity for long-term investors to consider deploying capital in certain sectors like consumer, healthcare, logistics, real estate, retailing, education and financial services.

“India is bursting with macro-economic potential. Powerful demographics, rising GDP per capita, and a robust services industry all suggest a potentially strong growth and investment profile ahead,” he said.

Economic force

“In comparison with China, which has benefited from a rural to urban migration, India is benefiting from not just urbanisation, but also from rising productivity among its rural population, which is responsible for an increasing share of the country’s manufacturing and services,” he added.

Stating that sentiment surrounding India tends to vacillate between euphoria and despair, he added, “Five years ago, India could do no wrong. Today, it can do no right. At this low point in sentiment, there is a cyclical opportunity to surprise on the upside.''

(This article was published on December 6, 2012)
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