First of all, the Indian government seems to be in two minds as to whether it wants to encourage foreign investment or not. You have industries like retail, where foreign investment isn't permitted (Editor's note: This interview took place before the government allowed 51 per cent FDI in the case of single-brand retailers) and industries like banking, where it is permitted but only up to 10 per cent (Editor's note: In public sector banks). If you go to almost any other country in the world, they don't have those restrictions. That does keep down the size of deals. The other thing is that since most of the Indian groups are family-controlled, there isn't really the same opportunity to do full buyouts that you might see elsewhere.
...The advantage that big funds like TPG, Carlyle and Blackstone have is that we don't have to invest in India. We are available to invest in India, we think India is doing well and it's a place we'd like to invest in, but if there are not opportunities or if we think the pricing is wrong, we'll invest in China, Japan or Indonesia.
...If India continues to have its economy perform well, and if the government pursues reforms and the infrastructure gets better, I think there will be lots of enthusiasm (about India). India is the flavour of the month at the moment, but it will not be the flavour of the month at all times.
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.