Government plans SPV to invest forex reserves in infrastructure

16 June 2007

Mumbai: The government will shortly set up a new company to utilise foreign exchange reserves for setting the country''s creaking infrastructure right, finance minister P Chidambaram said in an interview to a news channel.

"We will set up in the next two - three months, the special purpose vehicle that I had promised," finance minister P Chidambaram said in an interview to CNBC-TV18.

The SPV, he said, will borrow foreign exchange reserves from the RBI and co-finance external commercial borrowings (ECBs) for import of machinery by Indian firms.

India has a huge forex reserve of more than $200 billion, one of the largest in Asia, and there has been an ongoing debate on using this fund for improving infrastructure, Chidambaram said.

The country would require around $320 billion for developing infrastructure in the next few years.

He argued that using this reserve for core sector projects would not fuel inflation as this would be spent outside India for buying capital goods.