With the end of the global financial crisis, many of the big banks are scrambling to figure out how to manage the risks of the economic downturn.
While the government’s asset-stripping scheme was the first to come under fire, the biggest beneficiary of the scheme has been the private equity industry.
While the government has announced a plan to cut the tax rate on private equity investments by 25%, many private equity firms are betting that the rate will be even lower.
In fact, they are betting on a lower rate, in line with the country’s weak economy.
“There is a lot of optimism that the rates will fall,” said Paul Singer, chief investment officer of hedge fund Elliott Management.
“It’s been in a steady climb since the end and that’s why we’re here.”
But the private sector’s big bet is that the government will continue to tax the profits earned on those investments.
“We believe that the revenue from that [tax] is going to be very significant,” Singer said.
The country’s private equity and real estate sectors have also had to find a way to manage their risk in the face of an asset market that is largely unregulated.
Private equity companies, like Elliott Management, are investing heavily in infrastructure projects, including the construction of a new airport in Mumbai and a new railway line in Mumbai.
Real estate firms, like WPP, have invested heavily in the Indian market, investing billions of dollars in real estate properties like Mumbai’s Taj Mahal.
In India, the private and public sectors are facing a similar dilemma.
A lot of these firms are trying to find ways to make their money work even in the economic climate of financial chaos, said Jayesh Rana, founder and chief executive of the Delhi-based consulting firm, India Development Foundation.
But even as the private-equity sector and the real-estate sector are fighting for their survival, some of their biggest competitors have also started to step in to the fray.
“The big firms are stepping in to help out,” said Jayalalithaa, a managing director at the private Indian company GVK, which invests in real-property deals.
“We are the first ones to have done that.
They are investing into the infrastructure sector, for example.”
But for investors in the private investment industry, there is still a lot that needs to be done.
For instance, the Indian government has been slow to adopt the rule that says any money that is invested in a real estate project must be reinvested in the project itself, said Manish Singh, director general at investment consultancy BDA.
And the private firms aren’t necessarily ready to jump in with a massive, high-risk investment in a city like Mumbai, where there is no infrastructure infrastructure at all, said Rajesh Jain, chief executive officer of India’s largest private real estate company, Mistry Real Estate.
Rajesh said that India’s real-life infrastructure needs to get a lot more developed.
“The infrastructure needs a lot.
There is no doubt that it needs a little more investment.
We are going to invest in that infrastructure,” he said.