India is one of the strongest economies in the world. It is the second fastest growing economy behind China and is now the 12th largest globally. Even in the wake of the credit crunch, as the world braces itself in anticipation of a global economic slowdown, India, it would seem, is sitting pretty.

Lauded as being one of the BRIC nations, the name of the group of nations set to become the next G8, India has enjoyed exponential economic growth in the last eight years.

As a strong player in the global marketplace, India has learnt to take appropriate measures to minimise the effects caused by the global recession. While the UK and the rest of Europe are quaking at the thought of the credit crunch and being swamped by the ripples that are rapidly spreading across the pond from the US, India is in a relatively stable position. So why is this and how will India potentially ride out a downturn?

Over the last year, India’s corporate sector has seen a flurry of deal making, with capital raising and overseas acquisitions being major trends. In 2007, the Indian corporate sector was involved in $60.1 billion worth of M&A, which was a 109 percent increase from the year before, according to M&A consultancy Dealogic.

There is no doubt that acquisitions on a global scale are one of the mainstays of Indian’s burgeoning economic status. And most of the Indian corporates taking over foreign businesses are doing so by avoiding the highly leveraged transactions that have put the US market into a tailspin. Many of the acquisition targets have generally been profitable companies, as opposed to companies in trouble, meaning they have funded deals with bank loans and higher grade credit, which has helped them to steer clear of the credit crunch.

Of course the technology and the services industries have played a crucial role in India’s bid for economic superstardom. Companies from these industries have been at the forefront of India’s trend for global acquisitions, as they aim to position themselves as international entities, as opposed to companies that start and finish in the Asian sub-continent.

Over the last few years, many of the of the large Indian services and IT players have snapped up companies in the Americas and across Europe, in a bid to make their propositions even more appealing to their target customers in Europe and the USA. AppLabs itself in the last few years has pursued an acquisitive strategy, progressing from being an Indian player to a company with a global presence and it has done this predominantly through the buy outs of US and European technology services companies. 

Primarily it is India’s astute business acumen, enlightened strategy and optimistic attitude that have enabled it to steer clear of the credit crunch so far. However, the impact on the sub prime market means that the availability of debt to fund acquisitions is drying up. Whilst this might dent India’s propensity for growth, it is unlikely to stop it in its tracks.

India is a brave market, as are the other members of G8. Whether a global economic downturn occurs or not, there is little doubt that within the next ten to twenty years, the global economy will be a very different landscape, with India and China at the top of the tree.

*Makarand Teje is president and COO of AppLabs

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