Context:
India is contemplating creating a Bharat Sovereign Wealth Fund (BSWF) to tap a reservoir of national wealth that lies dormant in India’s economy.
Sovereign Wealth Funds (SWFs):
- Government-owned funds created from state surpluses, such as natural resources, trade surpluses, or budget excesses.
- Aim to generate wealth through strategic investments, ensuring financial stability and economic growth.
- Defined under the Santiago Principles (set of 24 voluntary guidelines promoting transparency, good governance, accountability, and prudent investment practices for SWFs)
- Characteristics –
- Owned by the general government (central and sub-national governments).
- Includes investments in foreign financial assets.
- Excludes public pension funds (owned by policyholders) and central bank reserve assets (not invested).
Types of SWFs:
- Stabilization Funds: Absorb shocks from volatile revenues, ensuring fiscal consistency.
- Future Generation Funds: Invest surpluses for long-term wealth, benefiting future generations.
- Public Benefit Pension Reserve Funds: Fund pension systems to meet long-term obligations.
- Reserve Investment Funds: Manage and grow foreign exchange reserves, stabilizing currency.
- Strategic Development SWFs: Invest in key sectors for national development.
- Foreign Currency Reserve Assets: Maintain currency stability and manage global trade power.
SWFs in India:
- 2007-08: The idea gained traction due to a surge in capital inflows (exceeding USD 108 billion in a year) but lost momentum after the Global Financial Crisis 2008.
- 2010-11: The Planning Commission revived the proposal, suggesting a USD 10 billion fund funded by foreign exchange reserves, PSUs, or budget allocations.
- 2015: National Investment and Infrastructure Fund (NIIF) was set up and remains India’s main structured investment fund.
Source: Financial Express
Previous Year Question
With reference to ‘National Investment and Infrastructure Fund’, which of the following statements is/are correct?
1. It is an organ of NITI Aayog.
2. It has a corpus of 4, 00,000 crore at present.
Select the correct answer using the code given below:
[UPSC Civil Service Exam – 2017 Prelims]
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (d)
Explanation:
Statement 1 is not correct. ‘National Investment and Infrastructure Fund’ was set up under SEBI.
Statement 2 is not correct. It has a corpus of 40000 crore.