Why India Needs a Sovereign Wealth Fund

India has more than doubled its foreign exchange reserves in the past two years. Isn't it time the country launched a sovereign wealth fund?

According to an RBI report of March 2008, India's foreign exchange reserves have accumulated to a massive $309.7 billion. (The global financial crisis has since had an impact on the level of India's forex reserves—as on September 26, 2008, the reserves stood at $291 billion) The fact of the matter is India has more than doubled the reserves in the last two years alone. A proud symbol of a strengthening external account at one time, the overflowing coffers of RBI now raise the question whether it is prudent on the part of the ministry of finance and the central bank to continue to hold these reserves and not invest them in high yielding assets. Our analysis shows that India will benefit by launching its own sovereign wealth fund to profitably deploy its excess reserves.

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