India is writing a digital growth story that’s turning heads globally, powered by a robust digital public infrastructure (DPI) model. At the heart of this lies the India Stack – a framework that includes the Aadhaar digital ID system and the Unified Payments Interface (UPI), a peer-to-peer instant payment system – which has democratized access to services and ignited a wave of innovation. This digital boom is drawing interest from global and domestic private equity investors, industry experts told PE Hub, with several seeing a fertile ground for AI development in the country.
The ripple effect of this momentum extends across sectors, from financial services to consumer and education, thanks to what Gopal Jain, co-founder and managing partner at Gaja Capital, described as a broader trend of financialization fueled by digitization. “It is still under-financialized as measured by debt to GDP, the penetration of equity and so on. So, digitization is aiding financialization, but digitization is also creating a fresh crop of players who use digital technologies better than others.”
While only one in five Indians had bank accounts in 2011, that number surged to 80 percent by 2018, Jain said. “Data and devices were pre-conditions to financial penetration.”
“Traditional development, compared with other countries, would have taken India 50 years to get this level of financial penetration,” he said. India’s DPI has created the “autobahn network to significantly drive financial inclusion, saving us decades and reviving the promise of lifting millions out of poverty before we age.”
Jain sees potential ahead, with India’s digital economy likely to grow 10x in the next decade, leaping from the $300 billion to $400 billion range to $3 trillion. “The whole consumer landscape is getting reshaped, not just by digitization, but also by the emergence of discretionary demand and a fresh crop of companies that can use digital technology better and cater to this new discretionary consumption.”
After the US and China, Jain positions India tech as the next “big” opportunity. “Other large economies are plateauing, but India still shows strong growth potential in digital and technology sectors.”
Mumbai-based growth equity and buyout investment firm Gaja is already backing this shift. Its portfolio includes EI, a B2B education software provider, LeadSquared, a CRM SaaS platform, and Signzy, a fintech company.
This optimism is echoed by Narendra Ostawal, managing director and head of India private equity at Warburg Pincus, who noted that digital systems like UPI are formalizing the economy, accelerating financial inclusion and generating vast amounts of transaction data. “This is likely to unlock new business models and create investment opportunities in fintech, consumer tech and financial services,” which are core focus areas for private equity.
Warburg’s tech investments in India include Perfios, a fintech software provider, and Whatfix, a digital adoption platform.
Developed by the National Payments Corporation of India (NPCI), UPI allows instant digital payments from person to person and person to merchant across different banks, and has become the backbone of India’s digital payments ecosystem. NPCI is an umbrella organisation for all retail payment systems in India.
UPI, alongside Aadhaar, has underpinned the digital payments and fintech growth in India, said Siddharth Narayan, managing director and India head at Permira. “UPI has been quite transformational and has led to a lot of opportunities in the fintech space.”
India’s digital payment applications such as Paytm, PhonePe, Google Pay and BharatPe, have thrived, buoyed by supportive policies and a shift towards cashless transactions among consumers.
Narayan also highlighted how broader reforms – from the rollout of GST to the building of digital infrastructure layers – have accelerated growth for tech-driven and digital-first businesses. “All of that together makes for an attractive investment opportunity set that is well aligned with Permira’s global strategy.”
Reflecting this confidence, the firm recently reconfigured its Asia strategy by shutting down its Hong Kong and Shanghai offices to concentrate on India’s promising market.
However, India’s digital leap didn’t happen overnight. Anchit Gupta, managing director at Samara Capital, traces it back to India’s telecom boom and wireless internet expansion, which gave rise to a “thriving” consumer internet ecosystem through the 2010s – fueled by VC and PE capital.
“Now, there is a powerful second-order shift: enterprise technology adoption,” Gupta said. Post-covid-19, Indian businesses of all sizes are embracing software, cloud and payment infrastructure like never before, he said. “This is opening up a new frontier for private equity, particularly in enterprise-tech models built for India,” Gupta added. “We believe the next decade belongs to tech-driven enterprises solving uniquely Indian problems at scale.”
Samara is a Mumbai-based private equity firm targeting venture opportunities in emerging markets across India.
AI-led value creation
At the frontier of this evolution is artificial intelligence. Warburg’s Ostawal sees India as uniquely positioned to benefit from AI-led value creation thanks to its abundant tech talent, cost-efficient engineering capabilities and the data-rich ecosystem generated by initiatives like Aadhaar and Digital India.
“AI adoption is gaining momentum across sectors – from healthcare and education to financial services, logistics and retail – driven by both enterprise needs and consumer demand.” Enterprises are embedding AI to improve productivity, customer targeting and automation, Ostawal said.
The country faces challenges such as skill gaps, cybersecurity threats and rising regulatory demands. But for private equity, that’s a clear opportunity: scalable, tech-first businesses that tackle Indian market challenges, providing both domestic growth and global relevance, Ostawal said. “This also creates meaningful opportunities for our [Warburg’s] portfolio companies that we can help drive, given our global platform.”
India ranks as the world’s third largest tech start-up ecosystem, behind the US and China. Its software and IT services exports rival the oil exports of giants like Saudi Arabia and Russia, Gaja’s Jain said.
AI is among the fastest-growing categories within that, with close to $1 billion in annual investments, Jain said. “One in five tech start-ups use AI and ML for productivity or customer features. India has the second largest pool of AI and ML engineers globally, with about 17,000 specialists, and a robust developer community of over 17 million on GitHub.”
India’s digital infrastructure and supportive government initiatives like the IndiaAI Mission have also created an enabling environment, Jain added. The Mission is the government’s central initiative to democratize compute access, enhance data quality and develop indigenous AI capabilities among other objectives.
The compute and infrastructure requirements for AI will also lead to interesting opportunities in the sector, Permira’s Narayan said.
As part of the objective to democratize compute access, the Indian government has launched the IndiaAI Compute Portal, which will provide subsidized access to compute to start-ups, researchers, academics and students. The government has contracted more than 10 companies to provide the GPUs that will power the portal.
Additionally, global enterprises are seeing “significant productivity gains using AI and we are seeing revenue per FTE move up after a long time in IT services companies that work with global enterprises,” Jain said.
The sweet spot for PE investment, Jain adds, lies in companies working on global AI transformation projects and B2B software businesses “with deep vertical and domain expertise that will leverage AI to deliver greater customer value through automation and reimagining business workflows.”
Narayan reinforces the global potential. “We see opportunities for Indian tech services firms to help drive this shift globally by enabling enterprises to adopt AI. Software and AI firms in India are innovating to help global businesses drive efficiencies and expand market offerings.”
Big players
India is home to some of the IT giants, including Infosys, with a market cap of $77.6 billion; Tata Consultancy Services at $143.4 billion; and Wipro at $32.1 billion, as of the end of this week.
Given that AI is now embedded in every business, no private equity investment can afford to ignore its impact, whether as a risk to traditional models or as an opportunity for disruption, Samara’s Gupta said.
While core AI innovation may still be US-led, Gupta sees India playing a growing role in “pioneering real-world applications and business models powered by AI.”
The most compelling PE opportunities will come from existing tech or tech-enabled businesses that are sharply pivoting to AI-led models, Gupta said. “These companies offer a ready base of customers, data and operational infrastructure on which scalable AI solutions can be built.”
India is going through a digital boom, with AI, enterprise tech and financial inclusion at its core. For PE investors, the opportunity isn’t just huge; it’s foundational to the future of India’s economic and technological trajectory.
