As per latest figures from the Emerging Markets Private Funds Association, private equity investments in India are down to just $2.06 billion in the first three quarters of the calendar year as against $6.17 billion in 2011 and $6.22 billion in 2010. This is also getting reflected in money raised for India focussed funds. Those too are down at $ 1.7 billion in nine months against $2.74 billion in 2011. The sum that has exited India at $2.4 billion in 2012 is far more than the investments made.

The downtrend is of course partly in sync with global developments. A survey by Grant Thornton released last week says that there were fund-raising fears in the global sphere as well, as nearly three-quarters (72 per cent) of general partners described the fund-raising outlook as either “negative” or “very negative”. In 2011, it was 46 per cent.

Harish HV, Partner, Grant Thornton India says private equity is finding it difficult to navigate emerging markets because of a combination of governance risks and the absence of deep capital markets to exit their investment.

The emergence ‘frontier markets’ outside of the more established hubs like China and India is also a warning signal for these hotspots. Among BRIC nations, only Brazil has managed to attract more PE funds. Indonesia and Malaysia and even smaller economies like Myanmar, Ghana and Tanzania are attracting the attention of angels.

A disaggregated analysis of private equity by PricewaterhouseCoopers show even now most money flows into the IT sector, even in a downturn. Since banks in are rarely finance risks, the options for entrepreneurs with fresh ideas has got that much more limited.

George is a Senior Editor based in Mumbai.