Context: Assets under custody of sovereign wealth funds in domestic companies rose by 60% to touch Rs 4.7 lakh crore in the FY 2024.
What are Sovereign Wealth Funds?
SWFs are special investment vehicles owned by the government of a country for investing in different assets including financial assets of other countries. These funds are funded by government surpluses like revenues from natural resources, forex reserves, proceeds from divestment, privatisation, etc., to expand the country’s excess reserve pool through long-term investments. E.g., ADIA, QIA etc. (India has its own sovereign wealth fund in the form of National Infrastructure Investment Fund.)
- The Indian regulatory framework does not define SWFs as a distinct category of investments and considers them as any other foreign investment under:
- Foreign Direct Investment (FDI)
- Foreign Portfolio Investment (FPI)
- Foreign Venture Capital Investments (FVCI).
The Union government has given a 100% tax exemption on dividend, interest, and long-term capital gains income arising from overseas SWF investments in Infrastructure.