Curbs on sovereign funds hard to enforce

Putting special curbs on the sovereign wealth funds (SWF) owned by foreign governments' operations in India may be difficult to implement, feel finance ministry officials.

The issue has gained prominence in recent times with national security agencies raising concern over the issue of strategic investment of such funds in India.

"Massive amendments in the FEMA Act will be needed if one wishes to put restrictions on such funds, which may not be feasible. Some funds have also even been registered as FIIs in India. So reversing the rules now may be difficult," a senior finance ministry official told Business Standard.

However, the official maintained that the ministry was only "internally examining" the issue and no decision had been taken so far.

Analysts also feel India cannot pick and choose countries to put unilateral restrictions. "Putting restrictions against such funds floated by specific countries will go against all principles of non-discrimination in multi-lateral agreements. May be a global agreement or protocol will serve the purpose," said Standard & Poor Asia-Pacific chief economist Subir Gokarn.

"I am opposed to government owning businesses. Governments should stay in the business of governance only," said independent economist Ajai Shah.

Sovereign wealth funds have been created by the cash-rich economies, like the UAE, Singapore, Norway and China, in order to get better returns from their huge forex reserves.

Concerns over the SWFs have now been widely debated in recent times across the globe due to their non-transparent nature of functioning and financial prowess. Studies show that the top 10 sovereign wealth funds of the world now manage assets worth $2 trillion.

The Singapore government-owned Temasek is one such fund which has several financial interests in the country, including the largest private telecom operator Bharti Airtel.

US-based private equity firm Blackstone, apart from its diversified investments in the country, has offered $275 million for a stake in Ramoji Rao-promoted media house Ushodoya Enterprises. However, the deal is yet to be approved by the Foreign Investment Promotion Board, the nodal agency for FDI in India.

The Chinese government-owned China Investment Corporation has recently picked up a stake in Blackstone for $3 billion, leading to concerns in some quarters.