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1 Feb ,2025

Why in News? 

India is contemplating creating a Bharat Sovereign Wealth Fund (BSWF) or The Bharat Fund (TBF) to tap a reservoir of national wealth that lies dormant in India’s economy. 

What is a Sovereign Wealth Fund (SWF)? 

  • About: SWFs are government-owned funds created from state surpluses, often from a variety of sources like  natural resources, trade surpluses, or budget excesses. 
    • SWFs help governments generate wealth through strategic investments, ensuring financial stability and economic growth. 
  • Characteristics: Santiago Principles 2008 defines SWFs as having 3 key characteristics: 
    • It is owned by the general government, which includes both central government and sub-national governments. 
    • It Includes investments in foreign financial assets. 
    • They invest for financial objectives. 
    • These key elements exclude public pension funds, owned by policyholders, and central bank reserve assets, which are not invested. 
  • Types: 
    • Stabilization Funds: Absorb shocks from volatile revenues, ensuring fiscal consistency. 
    • Future Generation Funds: Invest surpluses for long-term wealth, benefiting future generations. 
    • Public Benefit Pension Reserve Funds: Fund pension systems to meet long-term obligations. 
    • Reserve Investment Funds: Manage and grow foreign exchange reserves, stabilizing currency. 
    • Strategic Development SWFs: Invest in key sectors for national development. 
    • Foreign Currency Reserve Assets: Maintain currency stability and manage global trade power. 
  • Examples: Norway Government Pension Fund Global (USD 1.7 trillion, world’s largest SWF), China Investment Corporation (USD 1.35 trillion), Abu Dhabi Investment Authority (USD 993 billion) etc. 
  • SWFs in India:  
    • 2007-08: The SWF idea in India gained traction in 2007-08 due to a surge in capital inflows (exceeding USD 108 billion in a year) but lost momentum after the Global Financial Crisis 2008. 
    • 2010-11: The Planning Commission revived the SWF proposal in 2010-11, suggesting a USD 10 billion fund funded by foreign exchange reserves, PSUs, or budget allocations. 
    • 2015: NIIF was set up that remains India’s main structured investment fund. 

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