Sovereign Wealth Fund Decision Scorecard(Dsc)- Macroeconomic Evidences from India

Abstract

Sovereign Wealth Funds (SWFs) with combined asset under management of around $4.8 Trillion have emerged as major power in the financial world. The dominant effect of these funds in International finance was on display during the recent recession of 2008. The emergence of these funds has also resulted in renewed interest in academic research primarily focused on the portfolioand investments strategies of these funds. The On-Off d ebate for establishing an Indian Sovereign Fund to take up asset acquisition has been in process since 2008 and various commentators, economists and policy makers have suggested the establishment of fund with size any where ranging from $5 to $50 Billion. However, literature which has empirically analyzed the decision variables impacting the establishment of these funds is limited. Author has identified and collaborated list of 63 variables which were then rationalized to list of 30 variables that may affect establishment of Sovereign Wealth Fund for India. The identified variables were later distinguished under 6 decision streams. The static state of these variables was then analyzed with respect to macroeconomic and socio-political environment in country as on 2011. Author argues, that India is comfortably placed on forex reserve front which is adequate on all the adequacy matrices but the present slowdown in the economy, possible trade-off opportunities in infrastructure and social development and twin budget deficit on Current Account and Fiscal will weigh heavily against the creation of such fund.