Still time for stabilisation, sovereign funds: Reddy

Y V Reddy, Governor, Reserve Bank of India, today said that India is vulnerable to various international shocks as well as fluctuations in food grain production having implications on the economic situation.

Keeping this in mind, Reddy added that the time is not right to establish a stabilisation fund as well as a sovereign wealth fund in the country.

"In India, we do not have any natural commodities like (petro products) for exports which can give good earnings in exports. Also, the country has seen current account deficit consistently," Reddy said addressing the silver jubilee celebrations of Foreign Exchange Dealers Association of India (FEDAI).

The need for establishing stabilisation fund as well as sovereign wealth fund (SWF) is to be assessed in the backdrop of this fiscal and financial conditions in the country. "Even if the country decides in future on establishing stabilisation or wealth fund, there has to be stringent disclosure and accounting standards for them as they are accountable to the public," Reddy added.

Stabilisation funds are established from the windfall gains resulting from commodity exports and it could be used in smoothening the fiscal conditions.

SWFs are established from excess foreign exchange reserves that are then invested globally in high yielding instruments, hedge funds and private equity.