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KKR accelerates India investments

KKR accelerates India investments

New York based Kohlberg Kravis Roberts & Co  (KKR) plans to invest in manufacturing and bank assets in India via its $2 billion Global Investment Fund.

India’s  companies and financial organizations have ample potential for growth due to the availability of affordable labor and resources.  However, a high rate of interest set by the Reserve Bank of India to control rising inflation hinders debt payoffs and fresh investments from domestic sources.  KKR’s strong fund raising ability and the low interest rates in the U.S, it is easier for the company to finance the investments.

Now, looking at the short-term trend, the Indian economic scenario looks promising. The South Asian country’s GDP improved from 4.4% in the quarter ended Jun 30 to 4.8% in the quarter ended Sep 30, 2013. Price inflation has been stable for some time and the RBI trying to curb it further. Moreover, narrowing current account deficits and fiscal deficits are showing signs of improvement as well and are bolstered by the Narendra Modi Government’s new fiscal budget.

What this means:

As other PE firms follow suit, Indian corporate assets will get deployed more effectively and good companies won’t be starved of capital investment. This will allow many of the investees to scale up and lift the Indian economy along with themselves. American PE firms are masters of interest rate arbitrage and there is plenty of such opportunity between India and the United States at this time.

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