India is not looking to set up any sovereign wealth fund (SWF) for now, Finance Secretary Arvind Mayarm has said.
“We don’t think we have reached a stage where we can now commit our forex reserves to a SWF and start investing all around the world,” he said addressing FICCI’s National Executive Committee meeting here on Saturday.
Mayaram’s remarks are significant as it is the first time since the new Government assumed charge that a senior Finance Ministry official was commenting on the matter of sovereign wealth fund.
In the erstwhile UPA-I Government, the Prime Minister’s Council on Trade and Industry had suggested the setting up of a sovereign fund with initial corpus of $5 billion, to help fund acquisition of companies abroad.
However, this suggestion was not implemented.
India has been managing its current account deficit (CAD) only through capital flows, Mayaram pointed out. “It is not the balance of trade that is resulting in management of our CAD,” he said.
He said that most of the countries that had set up a SWF had a surplus on the balance of payments front. India was not yet there, said Mayaram.
“It will only be prudent for us to wait a little while more before we are able to improve our exports to the extent that we would have the comfort of being able to set up a SWF,” he said.
Mayaram said that India’s own requirements of forex could change very quickly and pointed out how a sudden outflow of FII investments from India last year resulted in rupee depreciation.
“But the situation is completely different today. We are in much stronger position (on the foreign exchange reserves and currency front) today,” he said.