India plans Rs5,00,000-cr sovereign wealth fund

Government of India is planning to create a sovereign wealth fund with a likely corpus of Rs5,00,000 crore by pooling shares of public sector undertakings (PSUs), which can then be utilized for further investments – both domestic and international.

Besides shares of PSUs and dividends accruing from these, it will also include shares from the Specified Undertaking of the Unit Trust of India (SUUTI). It may also accept capital from private investment companies and debt funds.

The fund will comprise of both new and existing shares of PSUs as also borrowings against shares.

Government of India owns over 51 per cent stake in 48 publicly traded companies. This along with newly listed companies could add up to around Rs5,00,000 crore.

However, the plans are at an early stage as the government has initiated a consultation process on the pros and cons of such a sovereign wealth fund.

Reports say the government has also consulted financial experts, including Neelkanth Mishra, chief economist at Axis Bank and Nilesh Shah, managing director of Kotak Mahindra Asset Management Co, on the matter.

The government is currently discussing the issue of creating necessary regulatory framework with the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) for facilitating the creation of a sovereign wealth fund.

The government’s move comes at a time when investments by sovereign wealth funds in the country have increased by 60 per cent to Rs4.7 lakh crore over the past one year.

Some of the top sovereign wealth funds such as Tamesk of Singapore, the Abu Dhabi Investment Authority, Kuwait Investment Authority and the Norwegian pension fund, are betting on India’s growth.