Everyone loves to talk about the trillion-dollar requirement for infrastructure projects in India to enable the country to realise the dream of creating Viksit Bharat by 2047. Transforming the economy into that of a developed nation, with a GDP ranging between $30 trillion and $40 trillion, is indeed a laudable goal. While tomes have been written spelling out this dream and detailing the modus operandi to achieve it, the moot question is: are we doing enough?
Take India's sovereign fund, the National Investment and Infrastructure Fund (NIIF). A quasi-sovereign fund in which the Indian government holds a 49 per cent stake, it is tasked with catalysing global investment into projects across the country. These include sectors such as manufacturing, green energy, agriculture, MSMEs, ports, railways and airports. Besides these, India also has to build digital assets and services, including data centres.
Since its launch in 2015, the fund has built a corpus of under $5 billion. By no stretch of the imagination can its size be compared with the sovereign wealth funds of other countries. Norway's Government Pension Fund Global, the world's largest sovereign wealth fund, has assets of around $2 trillion. The next four largest funds – including SAFE, Abu Dhabi Investment Authority, Kuwait Investment Authority and China Investment Corporation – each have assets under management of over $1 trillion. Even the 10th-largest fund, Hong Kong's Exchange Fund, has assets of over $0.5 trillion. The top 100 sovereign wealth funds collectively manage assets exceeding $16 trillion. A small country like Singapore has more than $800 billion in assets across its two sovereign wealth funds, Temasek and GIC. Even if one were to be charitable, the size of NIIF is minuscule and could probably be written off as a rounding error compared with any of the world's top 10 funds.
Given the massive funding requirements for infrastructure across sectors, there is something inherently wrong. There is a huge gap between the country's potential and the current size of NIIF. We have to think big and act big if the dream of becoming a developed nation over the next two decades is to be realised. There has to be a concrete biannual plan for NIIF to grow steadily over the next few years, preferably at a geometric pace. It has to take ownership of large projects and cannot remain a passive investor. It needs to come in as an anchor investor in transformative projects across sectors. As a government-backed fund, quasi-sovereign or otherwise, it has to take the lead and grow to a size that enables it to invest alongside some of the large Gulf and Singapore-based funds.
Acting big means going out into the market and actively wooing capital across geographies. The recent visit by private investors, facilitated by Danske Bank of Scandinavia, has to be replicated a hundredfold across other countries. Just as the RBI is currently in overdrive to mobilise foreign exchange through debt instruments, a dedicated board or think tank is required to devise ways and means of tapping global capital flows into NIIF. Given the upheaval in global capital markets caused by geopolitical challenges, investors are actively looking to shift assets to relatively safer and more stable countries.
The US economy will have to refinance around $9-10 trillion – nearly a quarter of its total debt of about $39 trillion – over the next year, albeit at a much higher borrowing cost of 3.5-4 per cent compared with 1-2 per cent earlier. This will push up government security yields and could result in more debt funds shifting to the US. However, there is still ample patient, long-term capital searching for sustainable and stable returns, as well as safety in long-duration assets. The Indian government needs to work out a plan to mobilise $50-100 billion over the next couple of years.
Sector-specific funds can be raised and marketed to various countries and sovereign wealth funds. A pipeline of bankable projects needs to be put in place across sectors, with NIIF itself coming in as the anchor partner. Instead of backtracking on the argument that active government involvement will crowd out private investment, NIIF should appoint more professionals, each with a specific mandate to manage one or two sectors. The government can contribute its share of capital to NIIF by pooling assets into InvITs and REITs. It can also induct more nominee directors to strengthen the existing board, which already includes stalwarts such as Deepak Parekh and Sanjay Bhandarkar. India has ample talent to manage funds and champion the global marketability of both high-risk and low-risk projects. If Japan is willing to back India's high-speed rail project through 50-year bonds, there are bound to be more countries willing to place larger bets on India's growth story.