Sovereign wealth fund proposal back on table
The Union government is holding discussions to set up a sovereign wealth fund that might be structured on the lines of funds set up by non-oil exporting nations such as Singapore, Vietnam, and Malaysia.
Tentatively named ‘Investment Management Company’, the sovereign wealth fund may also become a holding company for assets in all public sector undertakings, including nationalised banks, government sources, on the conditions of anonymity, said.
The ‘Investment Management Company’ may not be a listed entity and could be partly funded by the Union Budget. It may invest in various forms of assets, including private debt, private equity, infrastructure, and other sovereign wealth funds.
The investment arm might also be mandated with divesting and consolidating public sector companies, along with acquiring various businesses in both domestic and international markets, officials added.
The government is examining building the investment arm on the lines of Singapore’s state-owned investment company Temasek, Malaysia’s strategic investment fund Khazanah Nasional Berhad, and Vietnam’s State Capital Investment Corporation, government officials, familiar with the development, said.
All these state-run investment funds owned and managed investments and assets previously held by their respective governments. The objective of forming such an arm was to enable the government to focus on its core objective of
framing policies and allowing the entity to manage and commercially run the government’s investments.
In 2011, the erstwhile Planning Commission, now known as NITI Aayog, had proposed setting up a $10-billion sovereign wealth fund, partly funded by the country’s foreign-exchange reserves, to invest in energy assets abroad. A group of ministers, chaired by then finance minister Pranab Mukherjee in the previous United Progressive Alliance government, had agreed to the idea of setting up such a fund but the Ministry of Finance later junked it in December 2013.
“Various suggestions were received from different stakeholders for creation of Indian Sovereign Wealth Fund (SWF). During the course of consultations/deliberations, it was concluded that the setting up of the SWF is not feasible under the present scenario,” the finance ministry had said in December 2013.
“Most countries that have set up sovereign wealth funds have current account surpluses. There are very few investment arms carved out of the Union Budget itself. The rationale doesn’t exist in India,” Kavaljit Singh, director at policy research institute Madhyam, said.
However, CRISIL Chief Economist D K Joshi said there was “no harm” in trying to set up a governmentowned investment arm, which has been a success in countries like Norway.