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Recession: Best time to be an investor

February 07, 2009 18:52 IST

Venture capitalist and Silicon Valley tycoon, Kanwal Rekhi, on Saturday said that recession is the best time to be an investor and an entrepreneur.

"Recession is absolutely required, for resources will be freed up. Entrepreneurship thrives during recession. It is the best time to be an investor and the best time to be an entrepreneur because valuations are lower," Rekhi, who is the Managing Director of Inventus Capital, told reporters at the Entrepreneurship Summit organised by the Indian Institute of Technology in Mumbai.

The US-based former IIT-B alumnus said recession creates a set of good values and discipline.

Disapproving bail-out packages to boost economies, Rekhi said, "I don't believe in bail-outs...I would much rather let them die."

He said history has shown that bail-outs are generally not successful. "How many jobs do the bailout packages create?" he asked.

The government should, instead, invest more in primary education, primary healthcare and primary infrastructure, he said, adding that such packages are political gimmicks.

"They (the government) only show that they care. They should have set up 50 more IITs instead," he said.

Private Equity investor and CEO of Crossover Advisors, Vinnie Vyas, said that "a bail-out for a large bank or corporation which has a huge impact on the economy, provides a short-term relief. The intention is correct but evidence has shown till now that bail-outs have not been successful."

Rekhi said though the current environment was encouraging to entrepreneurial activities, the government needs to give tax incentives to VC and PE players.

On the global credit crunch, Rekhi said that there is no money in the US, Europe or Japan to invest in India in the short-term.

"In the long term, India is a bright market...Indians are the best entrepreneurs. They have made a name for themselves in the world... so money will come."

He said India's "passive growth" rate at 6 per cent is still better when major economies have slipped into recession.

"India is in a much better position than China because China exports 45 per cent of its products, while in India it is only about 15-20 per cent. The rest is domestic demand."

Vyas said for the global scenario to look up, the credit markets needed to improve followed by the capital markets.

"Credit availability at the right price is very important," he said.

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