With the changing investment scenario, the private equity scene is also changing in India. As more investment opportunities are coming up, private equity investors are likely to make their entry into India in a big way.In the 2004-2005 budget, several proposals have been put forward to increase FDI limits in various sectors to encourage foreign participation and fully open up the Indian economy. These steps will prove beneficial for the economy in achieving high growth rate in the coming years. During the last five years, several reform initiatives have been taken up by the Indian Government especially in the financial services sector that has resulted in rapid economic growth and has enabled the country to attain the status of preferred investment hub by foreign investors.

The sectors where significant FDI inflows are being witnessed are banking, telecom, insurance, and power. Out of these sectors, 74% FDI is allowed in banking, from the earlier limit of 49%, whereas other sectors are open for 100% FDI. The growing FDI has increased the country's GDP ratio and thus the income standard of the individuals.

In India, an upcoming concept of investment is `Private Equity.' This concept is still in the evolving stage, but its future prospects appear to be brighter as an estimated fund of $250-300 mn has been pumped into the Indian economy through private equity between July 2003 and October 2003. In the overall corporate buyout activities in India, private equity contributes less than 1%. This can be attributed to the low awareness levels among corporates and the conservative nature exhibited by the economy in this regard. However, with the recent developments in the economy, foreign investors are finding India the best place for private equity deals.

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