Governance & Social Justice
- Is it Unhealthy to Eat out in India?
- New National Education Policy
- SDG Gender Index 2019
- Self Help Group market linkages
- Supreme Court stops Maharashtra EWS quota
- Draft National Education Policy Controversy
- Acute Encephalitis Syndrome in muzaffarpur of bihar
- Private sector specialist in government jobs
- Abujh Maria PVTGs
- AWaRe: A WHO tool for safer use of antibiotics
- Digital Village Scheme 2.0
- Back to Village program in Jammu & Kashmir
- Child Labour in India – National Child Labour Project Scheme
- Operation Cleanup begins, Modi Government 2.0 dismisses corrupt officials
- 23rd St Petersburg International Economic Forum
- Will Financial Action Task Force put Pakistan in its Blacklist
- How powerful is the International Court of Justice?
- PM Modi in Maldives
- U.S. Now Requiring Social Media Details From All Visa Applicants
- United Nations Demands Britain To End Rule Of Chagos Islands In Six Months
- Chinese Language made Compulsory in Nepal
- Hong Kong Protests 2019
- India Invited to G-7 Summit
- PM Modi in Sri Lanka
- SCO Summit 2019
- Indian Navy Launches Operation Sankalp
- Iran shoots down US drone aircraft
- Pakistan Saved from FATF BlackList
- India warns of Commonwealth Games boycott
- Sudan political crisis
- Foreign Policy of India
- Modi 2.0, Ministry of External Affairs Opportunities & Challenges
- Guthi Bill protests in Nepal
- G 20 Summit 2019
- United Nation security council
- Agricultural self sustainability & food security of India
- Benefits of Cluster based modern Industry
- CBDT tweaks Income Tax rules for Senior Citizens
- Code on Wages Bill needs to be tweaked
- Custom Reforms in India
- Food processing in India
- Foreign Trade of India
- How to revive demand in Indian Economy?
- India’s Foreign Trade Slowdown
- India’s solar manufacturing strategy
- IndiGo Promoters Spat Controversy
- RBI’s revised circular on NPA
- Status of Self Employment in India
- What is Demographic Distress?
- What is Priority Sector Lending Limit?
- What is Strategic Overseas Fund?
- Jal Shakti Ministry launched
- India No Longer World’s Fastest Growing Economy
- Kolhapuri Chappal get Geographical Indication Tag
- Kaleshwaram Lift Irrigation Project
- Government’s plan for Digital Payment in India
- Retail inflation at 7 month high
- What is Middle Income Trap?
- Wholesale Price Index Inflation hits 22 month low in May
- India & World Trade Organisation
- India USA Trade War
- RBI purchases Government Securities worth Rs 12500 Crore
- What are BASEL III norms?
- World Bank’s Global Economic Prospects Report
- SEBI new norms for Credit Rating Agencies
- Telecom Sector in India
- Chennai water crisis
- One Nation one ration card
- Railway testing Tri-Netra Technology
Defence & Security
Science & Technology
- Air Pollution and Human Health
- Chennai Salem Highway Case Controversy
- Global Concentration of Atmospheric CO2
- One Health Philosophy
- Arctic Kelps: Underwater forests in the Arctic
- India unlikely to meet carbon sink commitment
- Asiatic lion radio collaring
- Japan decides to start Commercial Whale Hunting
- Phayeng becomes first Carbon Positive village
- Fall Army Worm Attack in India
Tag: GS 3 || Economy || External Sector || Foreign Trade
Why in news?
- Given the need for India to secure its mineral demands, to achieve its food requirements, and access critical resources for running sensitive industries back home, India should look at carving a committed fund.
- Overseas investments in the developing country context are no more confined to a mere expression of financial prowess to explore overseas markets.
- Given the evolving geo-economics, the need to –
- secure one’s long-term interest in areas like scarce natural resources, agricultural land, and
- creation of strategic infrastructure in key locations abroad, amongst others, becomes paramount.
- US, China, Japan: Since the beginning of this century, the world has witnessed an outward direct investment of $9.7 trillion, with the US leading the pack, even as China closes in to occupy the second position currently being held by Japan.
- China’s cumulative ODI stood at $767 billion during 2000 to 2017.
- India: India’s, on the other hand was 11 times lower at just $54 billion that is equal to just 1 per cent of global investments in these 17 years.
- According to the RBI, India’s ODI in 2018 was one of its lowest in recent times.
- FI support: Till the middle of the last decade financial institutions supported overseas acquisitions.
- However in recent times there has been an increasing receptiveness towards setting up dedicated funds by sovereign entities to undertake such overseas investments, with most being of a strategic nature.
- This trend has led to the proliferation of a host of dedicated funds globally catering to their domestic interest in the short to medium term.
- Over the years, Chinese financial institutions such as China EximBank, China Development Bank, China Investment Corporation – all sovereign entities set up to facilitate Chinese business growth overseas – have been at the forefront to manage these multiple funds.
- Many of these institutions have partnered with the likes of Inter-American Development Bank (IDB) in Latin America region, Hungarian Exim Bank in Eastern Europe, Russia Direct Investment Fund in CIS, amongst others to capitalise on the financing gap and potential in these select geographies.
- Analysis shows that during the period 2003 to 2018, Chinese investments in select strategic sectors have been twice that of India.
- In fuel resources and agricultural food, Chinese investments abroad are as high as 4-7 times that of India in the last 15 years.
- As an alternative to western development-led finance, China in recent times has also fronted the likes of NDB, the AIIB and the Silk Road Fund, symbolising its growing influence.
Other global examples
- Even the European Investment Bank has set up the African Lion Mining Fund to invest in early stage equity in mineral resource companies, particularly in gold and base metals, besides mineral commodities such as industrial minerals, gemstones.
- Besides KfW (Government of Germany) and Deutsche Bank have also established the Africa Agriculture and Trade Investment Fund to uplift Africa’s agricultural potential.
- The US in 2018 formed the US International Development Finance Corporation, to pursue its strategic interests through its own government’s backing.
- This initiative is considered as an effort towards specifically countering China’s influence globally, and furthering the US foreign policy goals whilst fostering participation of the private sector abroad.
India – way ahead
- Sovereign Wealth Fund: While India today exhibits global aspirations to seek foothold across geographies, it is largely bereft of any such dedicated fund to boast of.
- However, the demand here is not to create a Sovereign Wealth Fund whose objectives are to get better returns from its investments, amongst other purposes.
- The argument here is for a strategic fund which facilitates India’s investments overseas in critical areas.
- Specialised government financial institution: The dedicated overseas strategic fund could be housed and administered by a specialised government financial institution, akin to the Chinese model.
- The fund could be meant for strategic investments by Indian PSUs and quasi-sovereign institutions planning cross border investments of longer tenor.
- Diverse areas: The proposed fund could also become an arm of an existing financial institution with specialised operations in diverse areas.
- What is Strategic Overseas Fund? How it can help India secure its long term growth goals?