Venture capital investments in India have dropped to $2.2 billion in the first quarter of 2020—down from $6bn the previous quarter—as the country’s tech industry struggles with a downturn in capital risk and the onslaught of the Coronavirus pandemic.
According to the Pulse Report by KPMG, 2019 saw a record $14.5bn pumped into the Indian economy across 909 deals. Yet this term has seen interest dry, as companies focus on staying afloat amid a nationwide lockdown that is surpassing its first month in action.
“Initially, India was not as affected by COVID-19 in Q1 ’20 compared to China,” writes the report. “Concerns related to the pandemic grew later in the quarter, due in part to the fact (that) India receives a significant amount of VC investment from international VC firms and corporates.”
Indian tech giants had already suffered a share price hit upon the news that United States President Donald Trump was pondering a suspension of the H1-B visa program. The H1-B is favored by tech firms, and over two-thirds of its holders are Indian.
India has not suffered effects on a par with the US or some parts of Europe: it has reported just under 30,000 cases and 937 deaths so far. Speculation abounds as to why that is, from the severity of the lockdown—which in some cases saw police assault those suspected to be breaking it—to the hot subcontinental climate.
But that has not saved India’s economy from a downturn. The country’s government in Delhi recently adjusted its foreign direct investment norms, seeking approval for investments arriving from border neighbors including China. Two-thirds of India’s unicorn startups—private firms valued at $1bn or more—have at least one Chinese investor.
“While the pipeline for deals is expected to remain relatively robust in India, deal flow is expected to become very slow, particularly in Q2’20,” the report added.