Federation of Indian Chambers of Commerce (Ficci) has asked the government to set up a $1.4 billion Global Technology Acquisition Fund (GTAF) out of forex reserves to help support small and medium enterprises (SMEs). In a representation to the National Manufacturing Competitiveness Council (NMCC), Ficci said such a fund would help in optimally utilising the forex reserves, and also help in managing the "growing problem of forex inflows."As per Ficci's proposal, a special purpose vehicle created for the proposed fund will borrow rupees from the Reserve Bank of India by issuing securities and then buy dollars to lend it to SMEs. "Such a mechanism would be inflation- and liquidity-neutral as it would help in taking out some dollars thereby easing pressure on the rupee," a Ficci release said. A similar proposal for the infrastructure sector is already under discussion between the government and the RBI. According to Ficci, many countries are operating funds in which they allocate their excess forex reserves. "The accumulation of official reserves far beyond established benchmarks of reserves adequacy has led to an increasing number of countries to allocate their excess reserves to Sovereign Funds. Currently, the size of these funds is valued somewhere in the range of $2.2-3.2 trillion, and is expected to soar to $10 trillion in the next 10 years," the release said.The industry body estimated that if 2% of SME production is earmarked for investment to acquire new technology, the proposed fund would be worth Rs 5,400 crore, which is roughly $1.4 billion or 1% of the total foreign reserves.The industry body further proposed that the fund could support 50% of the technology acquisition involving know-how, patent, proto-type and design with a maximum limit of $2 million per deal.
