Sonia Gandhi should thank Finance Minister Chidambaram for resisting proposals to put part of India’s foreign exchange reserves into a Sovereign Wealth Fund, which would buy equity shares in top global companies. Many countries with surplus forex reserves?”mostly oil exporters, but also China and Singapore?”have set up SWFs that invest in equities. India has experienced a huge inflow of dollars in recent years, raising its reserves to $ 290 billion, vastly in excess of any balance of payments needs. In a seminal paper two years ago, economist Larry Summers, former US Treasury Secretary, made a strong case for developing countries to put excess reserves into stock markets. Even after that, he calculated, 121 developing countries would have excess forex reserves of $2 trillion, equal to 19% of their combined GDP in 2004. So, Summers proposed that all developing countries should put excess reserves into SWFs that would invest in shares. read more
[Tags]reserves, india, swfs, countries, chidambaram, excess, forex news[/Tags]
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