India should set up a sovereign wealth fund (SWF) for global strategic acquisitions: Assocham

May 21, 2012

With debt loads sinking weaker economies worldwide, India ought to aim at setting up a sovereign wealth fund (SWF) which is financially viable and have a broader objective of furthering the country’s role as a global player, says Assocham.

There are more than 50 sovereign wealth funds managing assets worth nearly three trillion dollars. Most of these are run by countries with huge trade surpluses and are funded mostly by oil and gas exports. India is the only BRIC nation that does not have a SWF. China, Singapore, Saudi Arabia, Norway, Kuwait and Russia are among top countries that have large wealth funds to make investments abroad.



SWF are an important component to generate nation’s wealth. They have emerged as formidable global investors and often evoke concerns in countries where they put in money. If India’s GDP has to grow at more than 8 per cent, then many sectors must grow faster than that and SWF will play a crucial role. The sectors which would benefit from acquisitions made by SWF could pertain to oil and gas, coal and infrastructure. With India’s current growth, the country will need to secure its energy needs of the future.

The SWF’s structure should be based on a public private partnership model, said Assocham adding the fund will help stabilise the economy by neutralising the effects of capital flows. The purpose of setting up a sovereign wealth fund is to primarily garner better returns on existing foreign exchange reserves which now total nearly 300 billion dollars. At present, most of these funds are of demand nature, often used for macro-economic exchange management and parked with the Reserve Bank of India which adheres to prudential norms.

SWFs are becoming increasingly important in the international monetary and financial system, and attracting growing attention. However, quick decision-making and transparency should be built-in features of the India’s SWF, added Assocham



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