InvestorQ : Can India have a sovereign wealth fund when it is running trade deficits?
diksha shah made post

Can India have a sovereign wealth fund when it is running trade deficits?

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1 week ago
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That is normally a question and also the reason why India did not go for SWFs in the past. The argument is that India runs big trade deficits and doesn’t have surplus export surplus to park. But the real issue is not about exports, but about stability of the forex reserves. Even in the pandemic, India hardly suffered major dip in forex reserves. Let us also not forget that if the PLI schemes take off and oil imports come down, things will look different.

More importantly, this is about putting forex reserves to more productive use. Look at China. They floated their SWF in 2007 with $200 billion and today it is managing more than $1.1 trillion. When your forex kitty is relatively stable, as is the case with India, there is room to take risk and enhance returns on the kitty, rather than just sit on low paying treasuries. It is time for India to think in terms of SWF, since the stability box is already checked.

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