Sovereign Wealth Fund: India already has one!
Sanjay Sinha, founder, Citrus Advisors, told NDTV Profit that concerns over the rupee and confusion over the implementation of the General Anti Avoidance Rules, or GAAR, are taking a heavy toll on the market sentiment. He is, however, hopeful that the Nif
The government is talking about setting up a new sovereign wealth fund or SWF to buy energy assets abroad. This could mean allocating more financial resources from already strained budgetary resources.
India already has sovereign wealth.
To activate the fund, India needs political will more than money.
Here are some pointers:
• Sovereign wealth funds are typically created by countries that have a large budget surplus. Countries like China, Norway, Singapore, Saudi Arabia and other oil rich nations in the Middle-East have large sovereign wealth funds. They buy equity, gold or other assets within their own countries or overseas. For example, Government of Singapore and Temasek are two sovereign wealth funds in Singapore. The total value of SWFs globally could be over $ 5 trillion.
• The BSE PSU index has a market cap of Rs 15,57,639 crore. This is about 25 per cent of the total value of shares listed on the exchange.
• The government ownership in these entities is about 70 per cent of the value or Rs 10,90,347 crore. This is the value of the government ownership in these companies which is actually sovereign wealth. Thus, the value of India’s sovereign wealth fund with assets listed on stock exchanges is $ 205bn. This does not include unlisted public sector enterprises or smaller public sector companies. Hence, the value of India's sovereign wealth could be much more than this.
• Technically, the government can transfer $ 205bn worth of equity ownership into a sovereign wealth fund. It can appoint professional managers and the finance ministry can keep an oversight.
• The government need not sell any asset. An intention to convert government ownership into a sovereign fund would push India’s sovereign rating up. It will make India's finances look healthy. India would then have access to cheap debt if it discloses the ownership of public sector enterprises as a liquid asset.
• Such a fund could also be used for meeting programmes that do public good. Such a fund can pay for creating social and physical infrastructure, run government sponsored food programmes or minimum wage guarantee schemes.
• Currently, these assets are controlled by central government ministries that may not want to give up control. Most of the public sector enterprises function as departments under respective ministries. Activist institutional investors are forcing shareholder friendly actions like the one taken by UK’s The Children International Fund in Coal India. However, to create sovereign wealth, India needs political will more than money
