Private equity (PE) investment activity in India experienced a significant slowdown in 2025, a trend attributed largely to broader global uncertainties stemming from geopolitical developments and evolving trade policies. This analysis comes from KPMG's Pulse of Private Equity Q3'25 report, which revealed a marked decrease in investment compared to the previous year.

By the end of the third quarter of 2025, PE investments in India totaled USD 14.9 billion across 217 deals. This figure starkly contrasts with the USD 26.3 billion recorded across 289 deals for the entirety of 2024. KPMG's report cautions that if the current pace of activity persists through the end of the year, 2025 could emerge as the weakest year for private equity investment in India since 2019, and the slowest for deal volume since 2020.

The primary drivers behind this moderation are cited as uncertainty surrounding US tariff policies and heightened geopolitical tensions, which have made forecasting risks and returns more challenging for investors. Despite this temporary setback and the deceleration in investment, KPMG's findings underscore that private equity investor interest in India remains fundamentally strong and intact.

Historically, India has been a robust destination for PE capital, consistently attracting over USD 20 billion in PE investments annually between 2020 and 2024, with deal volumes reaching their peak in 2024. The enduring appeal of the Indian market is underpinned by its solid macroeconomic fundamentals, favorable demographic profile, robust domestic consumption growth, and impressive capital market performance. These factors continue to support sustained investor engagement and confidence in the long-term potential of the region.

An observable trend highlighted by the KPMG report is the increasing adoption of a "business builder" approach by many global private equity firms operating in India. This strategic shift involves establishing local offices and dedicated teams, pursuing majority or controlling stakes in companies, and actively participating in the operational and strategic decision-making processes of their portfolio companies. This indicates a move beyond mere financial investment, with PE firms aiming to unlock value and drive business growth through direct involvement.

Furthermore, the maturation of India's private equity ecosystem is evident in the growing size of India-focused funds. Fundraises exceeding USD 1 billion, which were once uncommon, have become more frequent, signaling deeper institutional participation and a more developed market infrastructure.

From a sectoral viewpoint, the report identifies several key areas that continue to attract private equity interest. These include technology, particularly with a shift in focus from traditional IT services to software-as-a-service (SaaS) models and the expansion into manufacturing segments, including AI-enabled manufacturing. Healthcare and life sciences also remain strong contenders, as does the financial services sector, which spans banking, non-banking finance, insurance, wealth management, and fintech.

Looking ahead, KPMG anticipates that the current slowdown in private equity investment activity is likely to persist until greater clarity emerges regarding global trade and tariff policies. The report also suggests that increased competition for high-quality assets could influence valuations once market conditions begin to stabilize.