India’s First Sovereign Wealth Fund With ₹50 Lakh Crore Corpus: All You Need To Know

Summary

The Indian government is setting up its first Sovereign Wealth Fund with an initial corpus of 50 lakh crore rupees. This fund, managed by the government, will invest in assets like stocks and real estate to generate economic benefits and stabilize the economy. The fund aims to accumulate capital through the sale of shares, dividends, and borrowing against shares of public sector undertakings. India joins around 40 countries with Sovereign Wealth Funds, which are used for strategic investments and economic growth, similar to well-known funds like Singapore's GIC and Norway's Government Pension Fund Global.

Takeaways

• 🇮🇳 The Indian government is initiating its first Sovereign Wealth Fund (SWF) with an initial corpus of 50 lakh crore rupees.
• 💼 A Sovereign Wealth Fund is a state-owned investment fund that uses surplus revenue from exports or reserves to invest in various assets like stocks, bonds, and real estate.
• 🌐 The primary purpose of SWFs is to generate economic benefits for citizens and stabilize the economy during fluctuations, acting as a 'rainy day fund'.
• 💹 India aims to accumulate the initial corpus by pooling shares from listed public sector undertakings (PSUs), selling new and existing shares, receiving dividends, and borrowing against shares.
• 🏦 The government will transfer its shares in listed PSUs and the specified undertaking of the Unit Trust of India (SUUTI) to the fund.
• 📈 The fund is expected to provide an initial corpus of 50 lakh crore rupees, leveraging the government's ownership in 48 publicly traded companies.
• 🌍 The Sovereign fund will invest both domestically in India and internationally, following the model of successful funds like Singapore's GIC and Temasek.
• 🏆 India's move to establish a SWF is in line with approximately 40 other countries, including large economies like China, the US, and Russia, as well as smaller ones like Pakistan, Indonesia, and Malaysia.
• 🔍 Countries utilize SWFs for strategic purposes such as acquiring critical assets and building infrastructure globally.
• 🏢 The Indian government's SWF is intended to be professionally managed, aiming to emulate the success of prestigious corporations and aggressive international investments.

Q & A

What is a Sovereign Wealth Fund?

A Sovereign Wealth Fund is a state-owned investment fund managed by a government, typically using surplus revenue from a country's exports or reserves. The money is invested into various assets like stocks, bonds, and real estate to generate economic benefits for the citizens and stabilize the economy during economic fluctuations.

What is the initial corpus planned for India's first Sovereign Wealth Fund?

The initial corpus planned for India's first Sovereign Wealth Fund is 50 lakh crore rupees.

How does the Indian government plan to accumulate the initial corpus for the Sovereign Wealth Fund?

The Indian government plans to accumulate the initial corpus by pooling its shares in listed public sector companies, selling new and existing shares, receiving dividends, raising money from strategic investors, and borrowing against its shares.

What is the role of SUUTI in the Sovereign Wealth Fund?

SUUTI (the unit Trust of India) holds shares in various private listed companies. The government will transfer its shares and listed PSUs, as well as the specified undertaking of SUUTI, to the Sovereign Wealth Fund.

How much stake does the Indian government own in publicly traded companies?

The Indian government owns over 51% stake in 48 publicly traded companies.

What will be the investment strategy of India's Sovereign Wealth Fund?

The Sovereign Wealth Fund will invest the money both in India and abroad, focusing on generating economic benefits and stabilizing the economy.

Why does India need a Sovereign Wealth Fund?

India needs a Sovereign Wealth Fund to generate economic benefits, stabilize the economy during fluctuations, and to manage and invest surplus revenue effectively.

How many countries have their own Sovereign Wealth Funds?

About 40 countries have their own Sovereign Wealth Funds.

Which are some of the well-known Sovereign Wealth Funds globally?

Some well-known Sovereign Wealth Funds include Norway's Government Pension Fund Global, Singapore's Temasek, Abu Dhabi Investment Authority, Qatar Investment Authority, and Mubadala Investment Company.

What is the inspiration behind India's Sovereign Wealth Fund model?

The inspiration behind India's Sovereign Wealth Fund model is Singapore's Temasek and GIC, which are known for their professional management and aggressive investments abroad.

How do countries like China and the US utilize their Sovereign Wealth Funds?

Countries like China and the US use their Sovereign Wealth Funds to acquire critical assets and build infrastructure in several countries.