Key facts
- India is Citi's third most important market in Asia.
- Opportunities are expected in AI, energy, and data-center infrastructure.
- Foreign investors are concerned about India's position in the global AI race.
- Long-term conviction in India remains strong due to demographics and manufacturing growth.
- Improvements in ease of doing business and tax reforms are needed to attract foreign capital.
Achintya Mangla, head of financing and Investment Banking at Citi, stated that India remains a crucial market for the bank, ranking as its third most important in Asia. Despite foreign investors expressing concerns about India's standing in the global AI race and favoring markets like South Korea and Taiwan, Mangla affirmed that long-term conviction in India remains exceptionally high.
Mangla noted that opportunities are anticipated in AI, energy, and data-center infrastructure. He pointed out that while global IPO pipelines have slowed, India experienced a record run in previous years and is now seeing a slower pace. He also mentioned that M&A activity has been robust in the US, driven by high valuations and liquidity.
The primary concern for foreign investors, according to Mangla, is India's perceived lag in the AI race, with a significant portion of its urban workforce in IT and financial services being potentially impacted by AI. This leads investors to question whether to invest in India or in markets more directly linked to the AI supply chain.
However, Mangla distinguished short-term volatility from sustained conviction, highlighting India's favorable demographics, growing manufacturing sector, and visible infrastructure improvements. He cited that some of the largest private equity funds have raised more capital for India investments in the past year than ever before, suggesting that foreign institutional investor withdrawal is a short-term effect.
Key sectors expected to drive deal activity include AI, construction for data centers, and power and energy, as energy is a significant constraint on compute power. India's potential to provide cheaper renewable energy for data centers was also mentioned. Mangla noted that India currently lacks large cloud-compute providers or hyperscalers and is in the early stages of semiconductor development.
To attract more foreign capital, Mangla suggested improvements in withholding tax on debt and lower taxes for foreign investors, while emphasizing the persistent challenge of improving the ease of doing business in India.