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VC investment in India is expected to remain soft in the first quarter of 2023, before starting to pick up in Q2 -- in part due to India's strong growth and consumption expectations, a new report showed on Thursday.

VC investment in India remained slow quarter-over-quarter as VC investors, primarily investors from the US, continued to take a wait-and-see approach given global macroeconomic uncertainties, according to KPMG aPrivate Enterprise Venture Pulse' report.

VC investment in agri-tech in the country is expected to grow considerably over the next 12-24 months as startups in the space mature and attract larger funding rounds, the report showed.

"There's so much entrepreneurship in India and investors see this. A lot have been betting on micro-funds as a way to get their feet on the ground to identify diamonds early -- and this has really worked well for some larger VC funds," said Nitish Poddar, Partner and National Leader, Private Equity, KPMG in India.

Meanwhile, the global venture capital (VC) investment dropped for the fourth consecutive quarter in Q4 2022 -- from $102.2 billion on 9,767 deals to $75.6 billion on 7,641 deals.

The decline came despite large deals in the energy sector, including alternative energy vehicles, battery technologies, and alternative power generation and distribution technologies as governments seek to secure energy independence and meet their climate obligation, according to the report.

The US recorded the largest proportion of investment with Asia second, despite attracting three $500 million+ mega deals across the quarter.

"Globally, we continue to see downward pressure on valuations in early 2023, leading many companies to postpone fundraising efforts in hopes of better times ahead," said Jonathan Lavender, Global Head, KPMG Private Enterprise, KPMG International.