The recent news of US President Joe Biden banning certain US investments in Chinese Tech via PE/VC routes has massive implications on the global flow of capital and India as we head for a Multi-polar world where much of what was commonplace in the last 3 decades may not be so. US capital’s constraints in China are India’s moment to seize the initiative. If India’s Manufacturing Renaissance is important, the ability to attract different types of Balance Sheets and Capital from the US is even more critical.
But, It’s important to realise that there are many more capital sources besides VC and PE in the US. The news of US curbs on capital isn’t one-off but the start of a structural reset in capital flows. However, the US needs to generate return on its capital given it’s stuck in a structural real rate of growth range of 2-3%. So, where does the US capital go? The obvious answer is India. However, India needs to proactively seize the opportunity to attract both equity and debt capital, especially into its burgeoning but rapidly growing private market and small and medium enterprises. The path forward is innovation around Investment vehicles and structures that allows low-cost capital to spur growth and economic opportunities.
Therefore, as the 21st Century plays out, it’s India’s turn to attract global business and capital. Effectively partnering with the US will also allow India to tap into capital sources from across the globe. The troika of India’s consumer markets, global capital, and effective regulations can help further boost Indian economic growth and cement India’s position as one of the most important economies in the world, perhaps even the most important.