No sovereign wealth fund for now, says govt

The government has no plans to establish a sovereign wealth fund at present, Finance Minister P Chidambaram said in the Rajya Sabha today.

"There is no such proposal under consideration of the government at present," Chidambaram said in a written reply. A sovereign wealth fund is owned by the government and is mostly created out of large foreign exchange reserves for strategic investments in debt and equity markets of other countries.

On April 22, Chidambaram had informed the Rajya Sabha that the Prime Minister's Council on Trade and Industry had suggested setting up of a sovereign wealth fund to acquire companies abroad.

"The Prime Minister's Council on Trade and Industry has, in its meeting held on December 18, suggested that there is a need to create a sovereign wealth fund of $5 billion to begin with for financing acquisition of companies abroad," he had said.

However, Chidambaram maintained that no directive had been issued to the finance ministry and hence the question of any timeframe to set up such a fund did not arise.

Recently, economic think-tank ICRIER said India could boost economic growth by as much as 2 per cent by investing the country's massive foreign exchange reserves in more profitable assets than in low-yielding US treasuries.

India's total foreign exchange reserves (including gold, special drawing rights and reserve tranche position at the International Monetary Fund) stood at $313 billion as on April 25.

China had recently moved $3 billion of its reserves to private equity firm Blackstone, making a shift away from US treasuries. Malaysia and Thailand are also examining ways of lowering their exposure to low-yield US bonds, ICRIER said.

After an announcement in Budget 2007-08 to use a part of the foreign exchange reserves for infrastructure financing without the risk of monetary expansion, the Reserve Bank of India has agreed to invest up to $5 billion in the wholly owned offshore subsidiary of India Infrastructure Finance Company set up in London. This subsidiary will lend to Indian companies implementing infrastructure projects in the India.