The UK and India have a unique relationship in many ways, none more so than our development partnership. 30 years ago, CDC, the UK’s government-owned development finance institution made its first major investment in India. Since then, as India’s economy has changed beyond recognition, we have helped to build some of the country’s most important businesses and financial institutions, including Apollo Tyres, UTI Bank, IDFC and Glenmark Pharmaceuticals.
This week I’m at the British High Commission in Delhi to mark both that 30-year milestone in India and the 70-year anniversary of CDC’s creation back in 1948. I am meeting key business leaders and will hear from government representatives about how the UK can continue to work with India to support its economic development. This is a country that has enjoyed significant growth and in the next decade will leapfrog Europe’s biggest economies, to become the world’s third largest. But despite all this, India still has developmental challenges, and CDC’s long-term capital and expertise can help make a difference.
Since those first investments in the late 1980s CDC has worked with Indian entrepreneurs and investors to build a $1.7 billion portfolio of over 300 investments in India. Those 300 CDC-backed companies support around 350,000 direct jobs and many more in their supply chains, making a tangible difference to people’s lives.
India’s economic powerhouses – sectors like IT and regions such as the South and the West – have succeeded in attracting capital from both leading Indian and global investors. CDC’s focus as a development investor means that our priorities change as the need for capital in India changes. We are now more focused than ever on getting commercial investment to the states most in need of capital, and to those sectors that can deliver real development impact.
That’s why I am announcing today that CDC aims to invest around $1.7 billion in India and the wider region over the next three years.
What does this mean in practice? And what type of investments will CDC make? Our objective is to make investments that can combine both financial return and social impact, so our focus will be on finding opportunities that meet these criteria. We will invest in companies that aim to provide affordable and accessible good and services whether in healthcare, energy or financial services.
Micro, small and medium-sized enterprises are critical to economic development in India but as many as 90% of these firms can’t access the finance they need to grow, so we will back the microfinance and non-banking finance companies that reach them. That will mean more investments like those we made in Ratnankar Bank and IIFL Finance supporting microcredit, agribusiness, affordable housing and SME loans. Or in Equitas, a Chennai-based finance company that reaches poor and unbanked customers with a broader range of financial services.
We intend to increase our direct investments in job-creating industries such as healthcare, particularly those providers bringing new treatments to market; finding new ways to serve poorer groups by reducing costs; or those that can train thousands of healthcare professionals. We will also back sectors like food & agribusiness that need to mobilise more private capital; and in clean energy projects like Ayana Power that help India make its transition to low carbon power generation.
Our support for the Indian investment ecosystem will increase too. CDC has played a crucial role in India’s investment funds market since the 1990s, backing 60 India-focused investment funds, more than any other Limited Partner in the private equity space. We will focus on both the mid-cap market in our target sectors and on a venture capital programme designed to finance innovative and high-tech firms.
Our venture capital approach will support funds that back technology firms providing affordable goods and services at scale in areas such as healthcare, like our recent investment in Pi Ventures. And we will be committing more to investment funds targeting job creating sectors like infrastructure, agriculture and affordable housing. This week, for example, we are launching a US$50 million investment with Kotak that will increase affordable housing in many of India’s lower-income states.
This focus on new technologies is fully aligned with the ambitious UK-India Tech Partnership, announced by Prime Ministers Theresa May and Narendra Modi back in April, which aims to pair the UK’s world-leading expertise with Indian’s tech industry. This motivates us to invest further into India’s tech transformation, creating thousands of jobs, generating more investments in both our economies, and tackling global challenges.
India is already an important economic partner for the UK and as we move towards a post-Brexit future that relationship will only strengthen. Development capital has a key role to play by pairing UK finance and expertise with the Indian entrepreneurs who are transforming the country’s business environment, opening up its markets and driving the rapid pace of India’s development. The UK and India together acting as a joint ‘force for good’ in the world.
The writer is Chief Executive Officer, CDC.