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SWF Investments in India: Insights by SRIRAM



  Sep 15, 2023

Sovereign Wealth Funds (SWFs) in India: Tax Benefits and Investment Growth


What are Sovereign Wealth Funds (SWFs)?

Sovereign Wealth Funds (SWFs) are investment funds owned and operated by a government or its entities.
These funds typically manage a country's reserves, often generated from commodities or foreign exchange reserves.
 

What's happening with SWF investments in India?

SWF investments in India have been steadily increasing.
The total assets of many top SWFs investing in Indian equities grew by more than 50% in a year.
 

Which countries have the largest SWF investments in India?

The Singapore government holds the largest SWF investments in India, followed by Norway.
Investment from Abu Dhabi Investment Authority saw a significant increase, particularly due to strengthened intergovernmental relationships.
 

Why are SWFs attracted to India?

India has become an attractive market for SWFs due to factors like rapid urbanization, increased purchasing power, and the T+1 settlement cycle, which reduces risks.
India has overtaken China as the most attractive market for investing in emerging market debt.
 

How much have SWFs directly invested in India?

In CY22, SWFs directly invested $6.7 billion in India, up from $4.3 billion the previous year.
Key sectors receiving these investments include healthcare, entertainment, asset management, renewables, and emerging industries.

What tax benefits do SWFs enjoy in India?

Since 2020, SWFs have been granted tax exemptions when they invest in specified infrastructure companies directly. This exemption also applies to investments in units of InVITS and AIFs(read ahead) that invest in infrastructure companies.
It's available for investments made before March 31, 2024, with a minimum holding period of three years.
 

Why are tax benefits important for SWF investments?

These tax benefits not only increase the net returns for SWFs but also encourage more investments in India's infrastructure sector.
It has led to a growing interest in establishing a physical presence in India among SWFs.
 

What's the future outlook for SWF investments in India?

SWFs are expected to continue growing their investments in India, diversifying their portfolios across different sectors, and potentially setting up offices in India's financial hubs like GIFT City in Gandhinagar.
 
 
Amplified:InVITS (Infrastructure Investment Trusts):

Infrastructure Investment Trusts (InVITS) are investment instruments in India that allow investors to participate in infrastructure projects. They are designed to provide stable returns by investing in income-generating infrastructure assets like roads, power, and pipelines. InVITS are similar to mutual funds and provide an opportunity for investors to access the infrastructure sector while enjoying tax benefits and liquidity.
 
AIFs (Alternative Investment Funds):

Alternative Investment Funds (AIFs) are a category of pooled investment funds in India that are not covered under traditional mutual fund regulations.
They include private equity, hedge funds, real estate funds, and more. AIFs cater to sophisticated investors and offer diverse investment strategies and opportunities beyond traditional asset classes, providing flexibility and potential for higher returns.
 
Stay updated on SWF investments in India. Link up with SRIRAM’s for more insights into this dynamic financial landscape.


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