Sovereign wealth shakeup? India’s leading business association, the Confederation of Indian Industry (CII), is proposing the setup of a new sovereign fund that would subsume the existing state-backed National Investment and Infrastructure Fund (NIIF).

The pitch: The CII is proposing the establishment of an India Development and Strategic Fund (IDSF) that would have a wide mandate to invest at home while also pursuing international opportunities, Hindu Businessline. The NIIF, which is 49% state-owned with domestic and international investors holding 51%, would slot in under the new fund if the CII’s plan gets traction.

Wait, how’s this different from the NIFF? The existing fund has a pretty tight focus on domestic infrastructure projects. Launched in 2015, it has AUM of about USD 4.9 bn. Unlike Gulf-based sovereign wealth funds, the NIIF doesn’t manage excess liquidity, have a mandate to allocate to public equities alongside private equity, or invest abroad.

CII is thinking big: The lobby group thinks the fund could mobilize up to INR 216 tn (USD 2.6 tn) by 2047 through a mix of budgetary support, asset monetization, and the transfer of government takes in some state-owned companies.

IN CONTEXT- The CII’s proposal comes as the Modi government is reportedly mulling the setup of a “Bharat Sovereign Wealth Fund” with an early AUM target of USD 50 bn and a mandate to invest across strategic sectors at home and abroad.

The CII is pitching a fund with two arms: one acting like a quasi development-finance institution and other pursuing strategic investments.

  • The development arm would effectively be an expanded NIIF, investing in infrastructure, clean energy, logistics, industrial corridors, healthcare, education, urban development, and small businesses.
  • The strategic arm would pursue opportunities in sectors including energy, minerals, and technology.

Governance framework: CII has recommended that the government enact an India Development and Strategic Fund law to outline the fund’s structure, capital sources, and governance. The fund would remain majority-owned by the government of India but managed by an independent professional board comprising senior officials and investment experts.

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