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India is actively exploring the creation of a Bharat Sovereign Wealth Fund (BSWF) or The Bharat Fund (TBF) to harness the untapped wealth embedded within its public sector ecosystem. This fund aims to unlock and strategically manage dormant capital, estimated at ?40 lakh crore ($450–500 billion), primarily held in equity stakes of around 80 listed public sector enterprises (PSEs) and banks.

What is a Sovereign Wealth Fund (SWF)?

A Sovereign Wealth Fund is a state-owned investment vehicle that manages national savings or surplus revenues—often derived from foreign exchange reserves, natural resource exports, or trade surpluses.

According to the Santiago Principles (2008), SWFs:

• Are owned by the general government (central or sub-national),
• Invest primarily in foreign financial assets, and
• Aim to achieve financial objectives rather than monetary policy.

Types of SWFs include:

• Stabilization Funds: Cushion fiscal shocks from revenue volatility.
• Future Generation Funds: Preserve wealth for long-term national benefit.
• Strategic Development Funds: Support priority sectors and national growth.
• Reserve Investment Funds: Enhance returns on foreign currency reserves.

Examples include:

• Norway’s Government Pension Fund Global ($1.7 trillion),
• China Investment Corporation ($1.35 trillion),
• Abu Dhabi Investment Authority ($993 billion).

India’s SWF Landscape and the BSWF Proposal

India previously explored SWF models in 2007–08 and again in 2010–11. While the National Investment and Infrastructure Fund (NIIF) was launched in 2015, it remains sector-specific and limited in scale. The proposed BSWF envisions a comprehensive and transformational fund akin to global best practices.

Key features of the BSWF proposal:

• Consolidation of government equity in PSEs and PSU banks under a professionally managed umbrella.
• Strategic divestment—e.g., reducing government stake from 51% to 40%—without losing operational control.
• Leveraging this pooled equity to attract global co-investors, potentially unlocking tens or hundreds of billions in foreign capital.

Why India Needs the Bharat SWF

• Wealth Unlocking: Potential monetization of over ?40 lakh crore in dormant government equity assets.
• Fiscal Prudence: Even a modest 2% annual divestment could yield $10+ billion, narrowing the fiscal deficit from 4.9% to ~4.6% of GDP.
• Strategic Sector Investment: Deployment into high-potential sectors—AI, semiconductors, electric vehicles, hydrogen energy, biotechnology—to drive innovation and economic leadership.
• Attracting Global Capital: Enhanced investor confidence, especially from established SWFs like those of Singapore, Norway, and Abu Dhabi, which are already increasing exposure in Indian equities and infrastructure.
• Social Sector Funding: Generate non-debt financial resources for welfare programs and national development missions.
• Soft Power Projection: Fund ventures, disaster relief, and advocacy efforts, strengthening India’s international standing.

Governance and Reform Imperatives

For the BSWF to succeed, it must:

• Be governed by a clear legal and regulatory framework aligned with Santiago Principles.
• Operate independently, with professional asset managers, market-based remuneration, and arm’s length oversight.
• Transition PSEs to function with autonomy and efficiency, reducing bureaucratic delays and enabling innovation.
• Foster joint ventures to turn around non-performing PSEs—among the 1,830 PSEs, around 400 remain non-functional, demanding nearly ?9 lakh crore annually in budgetary support.

Challenges and Concerns

• Macroeconomic Constraints: India faces a current account deficit and substantial fiscal pressures—conditions unlike traditional SWF-rich nations.
• Geopolitical and Market Risks: Global uncertainty and decoupling trends could impact cross-border investment strategies.
• Environmental and Technological Vulnerabilities: Investment risks in carbon-heavy sectors and exposure to data fraud or tech disruptions.
• Institutional Resistance: Political and bureaucratic inertia may delay implementation unless national interest is prioritized.

SWF Investments in India: A Growing Trend

Foreign SWFs are already deepening their footprint in India:

• $6.7 billion in direct investments in 2022 (up from $4.3 billion in 2021).
• Preferred sectors: healthcare, entertainment, renewables, infrastructure.
• Beneficiaries of tax exemptions on direct infrastructure investments via InVITS (Infrastructure Investment Trusts) and AIFs (Alternative Investment Funds), valid for investments made before March 31, 2024.

These incentives have encouraged foreign SWFs to explore establishing physical presence in India’s financial hubs, especially GIFT City, Gandhinagar.