Govt wakes up after China floats $200 bn fund
Govt is examining if a special investment framework is required to regulate sovereign wealth funds promoted by various countries, including China. ET MF Tracker
By Deepshikha Sikarwar, TNN |
NEW DELHI: The government is examining if a special investment framework is required to regulate sovereign wealth funds (SWFs) — government-owned investment vehicles promoted by various countries, including China. The finance ministry is carrying out a study which will look into issues that could confront the country if such funds make investments through stock markets or through the FDI route.
Some SWFs such as Temasek are already present in India and have made investments via the FDI route. Some other SWFs such as the one promoted by Abu Dhabi Investment Agency are registered as a foreign institutional investors. Though funds like Temasek have been present in the country for some time, what has made the government up its ante is neighbour China floating a $200-billion SWF — China Investment Corporation — in September. China has also invested close to $5 billion in Blackstone.
The total quantum of funds with SWFs the world over is estimated at about $2.5 trillion. Even a trickle from these funds could have huge ramifications for the Indian stock markets and the economy on the whole. Besides economic implications, there are security issues too, which the ministry will examine.
On the stock market side, the restriction of 10% investment by each FII can give some comfort. However, the government cannot draw similar comfort on the FDI side, especially in sectors which have been opened completely. Some sectors of strategic and economic importance are a matter of concern.
Since SWF are controlled by governments, it is felt that they would follow the agenda set by the country concerned. Management control of an Indian company slipping into the hands of a fund owned by a hostile country could pose an enormous problem, officials feel.
There are also issues about some of the countries promoting SWFs not enjoying market-economy status. Concerns about such investments entering into the country were expressed by National Security Adviser MK Narayanan on Tuesday.
Some SWFs such as Temasek are already present in India and have made investments via the FDI route. Some other SWFs such as the one promoted by Abu Dhabi Investment Agency are registered as a foreign institutional investors. Though funds like Temasek have been present in the country for some time, what has made the government up its ante is neighbour China floating a $200-billion SWF — China Investment Corporation — in September. China has also invested close to $5 billion in Blackstone.
The total quantum of funds with SWFs the world over is estimated at about $2.5 trillion. Even a trickle from these funds could have huge ramifications for the Indian stock markets and the economy on the whole. Besides economic implications, there are security issues too, which the ministry will examine.
On the stock market side, the restriction of 10% investment by each FII can give some comfort. However, the government cannot draw similar comfort on the FDI side, especially in sectors which have been opened completely. Some sectors of strategic and economic importance are a matter of concern.
Since SWF are controlled by governments, it is felt that they would follow the agenda set by the country concerned. Management control of an Indian company slipping into the hands of a fund owned by a hostile country could pose an enormous problem, officials feel.
There are also issues about some of the countries promoting SWFs not enjoying market-economy status. Concerns about such investments entering into the country were expressed by National Security Adviser MK Narayanan on Tuesday.
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