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| Feature: Eastern Promise |
A Passage to India
Saritha Rai
09/01/2005
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 When I first arrived, one needed a permit even to breathe,” recalls Robin
Farkas, former chairman and CEO of the now-defunct Alexander’s Department Store,
founded by his father, Alexander Farkas. The younger Farkas has been fascinated
by India’s potential since attending a wedding there in the 1980s. In his first
venture capital deal, involving a financial services firm he bought in the late
1990s and sold last year, Farkas doubled his money. It seemed like an
appropriate payoff for a strategy so long in the making.
When he first came
to India, Farkas quickly realized that he needed to learn how to navigate the
country’s bureaucratic business and regulatory regimes, so he joined the board
of a company domiciled there to gain experience. After learning the ropes, he
teamed up with a colleague to launch a private equity firm, ICF Ventures, in
1996. By then the Indian authorities had whittled down the permitting process
for establishing such such a fund: Farkas needed fewer than a half dozen approvals and he endured a
waiting period of less than three months.
 Government officials have since
made progress; indeed, deregulation is one of the catalysts fueling the Indian
economy. The government’s GDP growth target this year is 8 percent; last year it
achieved 6.8 percent, a letdown from the eye-popping 8.4 percent growth in 2003.
(The United States trundled along at a respectable 4.4 percent in 2004.) Prime
Minister Manmohan Singh warned in June that the country might not meet its
target, but he gave assurances that the economy would grow at least 7
percent.
Foreign private equity investors seeking to tap this rich vein are
drawn ever more to India’s booming high-tech sector, which is increasingly being
fueled by homegrown innovations in biotechnology and software rather than by IT
outsourcing. Foreign investors are also rushing to grab a share of India’s real
estate market, which became a particularly attractive option after the Indian
government made strides in the slow process of deregulating the market this past
March. However, moving capital into India remains expensive and
bureaucratic.
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