The South Asian nation has become Carlyle’s No. 2 investment destination in Asia after China, according to Gregory M. Zeluck, its Hong Kong-based managing director and co-head for buyout funds in the region. The U.S. firm has announced two deals in India in the past month — an acquisition of a 20% stake in billionaire Ajay Piramal’s pharmaceutical business for $490 million and paying $235 million for a stake in Bharti Airtel Ltd.’s data-center business.

India emerged as a rare bright spot for dealmaking this year, thanks in large part to $19.5 billion of investments in Mukesh Ambani’s technology ventures from Carlyle’s rivals such as KKR & Co. as well as the likes of Facebook and Google. The Silicon Valley giants are coming after India’s half a billion Internet users, whose growing embrace of everything from e-commerce to messaging and digital payments is drawing comparisons to the early days of China’s technology boom.

Overseas investment into both China and India has swelled enormously in the past two decades, according to data compiled by Bloomberg. China receives tens of billions more per year than its Asian rival, yet investment there peaked in 2015, before trade tensions, including the long-simmering dispute with the U.S., began to weigh on deals. By contrast, foreign investment into India last year was 134% higher than in 2015.

“China has just taken off in the last decade from an investment perspective and India is sure to follow,” Zeluck said in an interview. “It looks like we are on the inflection point now, this year and next year. I wouldn’t say it is going to explode but it is going to grow very substantially in the next five to seven years.”

Carlyle plans to step up investing in India’s media and digital sectors, Zeluck said. While the International Monetary Fund is forecasting that India’s economy will contract as one of the world’s biggest and strictest lockdowns takes its toll, the impact of the Covid-19 pandemic will potentially be beneficial for health care, he added.

“Some logistics may be a bit of issue, getting control of Covid at the beginning can be an issue,” Zeluck said. “Through the economic downturn, particularly pharma may show some upside as well. So pharmaceuticals and health care in general are two verticals that we think are investible at this point in time.”

Tensions between China and the U.S. will also prompt supply chains to move into India, Zeluck said. The pharmaceutical industry will be the biggest beneficiary, and electronics and other manufacturing may also see a shift, he added.

“We are very excited about India,” Zeluck said. “There were some economic troubles the country has already been facing. But we have a tremendous level of confidence that India will rebound and will be a great investment for the long term.”

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