The Hindu Business Line : Sovereign investing

The editorial on sovereign investment (Business Line, April 25) is timely and thought-provoking. The provocation to go in for a sovereign wealth fund may perhaps be because of the accumulation of forex resources and the continued inflows of foreign exchange to the country, but the fact remains that these do not reflect the real savings or earnings and can go out of the country anytime as the country’s current account continues to be in deficit.

It is necessary to attract foreign funds as a strong foundation for the growing economy and, at the same time, ensure that the inflows do not result in inflationary pressures and exchange rate instability.

This can be very well-achieved by creating a fund-styled Infrastructure Development Foreign Exchange Fund making it attractive for investors from abroad or exporters or forex earners in India or abroad, to subscribe to such a fund without involving rupee exchange.

Creation of such a fund would in the long run help to stabilise exchange rate fluctuations, build-up infrastructure involving expenditure in foreign exchange and, at the same time, reduce the cost at present incurred by the Reserve Bank of India, banks and the Government to maintain both monetary and exchange rate stability.

The fund suggested can be made attractive from the investment angle and the cost to maintain the same can be well recovered in terms of several benefits directly or indirectly that can accrue to the economy through operations of the fund.

The remedy suggested may appear to be innovative and not practicable, but will prove to be highly beneficial in the long term to the economy and its people.

T. V. G. Krishnan e-mail

More Stories on : Letters | Financial Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Pipeline realities

‘I have a three-point agenda for power’

Israel glitters with its diamonds

Marry growth with goodwill

Taking stock of RAW’s working

Sovereign investing