India considers loosening its investment rules for overseas sovereign wealth funds.
(June 11, 2013) -- A sharply falling rupee has led India's finance officials to consider relaxing the investment rules for foreign sovereign wealth funds.
As India continues to fight off the widening current account deficit, the finance ministry, the central bank, and market regulators are hoping that external investment could shore up the country's finances, and stave off its declining currency.
Two senior ministry officials, who declined to be named, told Reuters the aim was to attract more capital flows from wealth funds in Middle East countries. Finance Minister P Chidambaram has visited the Middle East in recent months to drum up investment.
"We will again meet and it will take some more time to finalize measures on sovereign funds," said one official who attended the meeting.
India's rupee hit a record low of 57.76 against the dollar on June 10, making the central bank's task of loosening monetary conditions to encourage an economic recovery more difficult.
Elsewhere, another senior ministry official told Reuters that plans to raise the cap on foreign institutional investment by $5 billion dollars have stalled, because money was flowing out of India.
He blamed the outflows on investor perceptions that the US is preparing to tighten monetary policy through a rollback of its quantitative easing program.
Norway's sovereign wealth fund is one of several already attracted to the region. Last month it announced plans to invest $4 billion in India, focussing in the areas of oil and gas, shipping and hydropower.
Other funds such as the $236 billion California Public Employees' Retirement System and Denmark's LD Pensions are also looking to invest in India's equity, debt and infrastructure, according to the Hindustan Times.
The Abu Dhabi Investment Authority is also expected to invest in some of the projects along the Delhi Mumbai Industrial Corridor, an infrastructure project which has also received $5 billion from Japanese institutional investors.
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