## Thursday, February 21, 2008

### Sovereign Wealth Funds and India

Shivnath Thukral hosted a debate on NDTV profit on Sovereign Wealth Funds, which dealt with two points of view. Should India worry about domestic assets being purchased by SWFs? And, should India setup a SWF? The show featured A. V. Rajwade, R. H. Patil, Somasekhar Sundaresan, Jayanth Varma and myself. Here's the video: part 1, part 2, part 3. You might like to also see this.

1. I agree with your view on channeling SWF money through hedge funds. But if they want to invest in individual company why not make SWF shares non-voting

2. They edited out R.H. Patil's breakdown of the reserves, some portion of which is...borrowed? Rajwade and Verma echoed this point. What is this about? How does the quality of reserves vary?

3. MK Narayanan, India's NSA had made observations sometime ago re. Global terror outfits channelising money into the India Markets.

Somehow this never figured in the discussion throughout.

4. For the investee country, how is a foreign SWF different from a foreign PSU ?

5. The discussion revolved around stereotype ideas. I think

A) SWFs willing to invest in India, should not be treated any differently from any foreign PSUs. And if we do not wish to make any difference between a foreign PSU and a foreign private entity, then SWFs logically should also not be treated differently. Applicable caps on foreign investments, takeover rules and the competition commission should be able to address the concerns on inward foreign investments (if any) on the same footing as of any other foreign investor.

B) For India, there is no harm in actually setting up a SWF even if it is a kind of hedge fund At least it will lead to more transparency on its functions and performance than it is possible today. A more structured management team, even if it is filled with Government appointees should be able to serve public interest better, as compared to a department within RBI. The way things are moving at this point, further accumulation of reserves are a certainty and it would be wiser to adopt atleast some improvement in management of these funds.

C) The macro issues which have led to this accumulation of reserves deserves actually more attention from RBI. That has been sufficiently covered by Mr. Ajay Shah.

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