A State sponsored SWF

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While the planning commission has apparently detailed all sector expenditure till now, the forex crisis is likely to continue for the state as the Indian rupee looks for levels like 65 and 72 while hanging on to 50 rupee levels.

India’s 117 bln deficit ( for the first eight months) structural disconnects from the global scenario and the inability of monetisation as a tstrategy to fill shortfalls in even a single head of expenditure means that the government is trying everything in the book to avoid the fisc crossing 5.4-5.5% against a target of 4.6% Excess expenditure on food and fertiliser subsidies amount to $10 bln by itself, and the bill goes on to include many other subsidies incl the one on energy (fuels) Stae Electricity Boards and infrastructure providers like BHEL have long employed barter in economic trade domestically and internationally as well as sale and lease back. States are running higher interest bearing $1.5 bln and more of bonds to pay for their deficit this year

The impact on our forex reserves of $310 bln ( Currency reserves are more than 90% of the reserves) can easily be imagined and thuis automatically there is more pressure on the rupee to go down rather as warranterd by the transactions required much like any of the midcaps trading in our own market with hardly 1% volume in traded shares

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All the above reasons cannot preclude one from using some of those reserves for the state sponsored infrastructure debt fund and thus the SWF india still does not own. Those investments will fill critical gaps in Indi’s social and physical infrastructure and are a required head for planners to cement and excute in the period till 2017. The fiscal deficit in the mean time will be funded by such interesting propositions as cross ownership of equity of PSE already employed extensively in traditionally developed economies of Europe and unlikely to cause much more discomfort than having state enterprise managements on their toes. even if ONGC, SAIL and BHEL are taken first and buybacks in COal India also considered we will more than cross the over spend on food and fertiliser subsidies and reduce the burden on OMCs However PSEs might want to wait to find like minded PSEs for cross holdings like the OMCs int he same sector with ONGC and if such patchwork can be arranged in the next 4-6 weeks, I daresay people would be willing to wait. NMDC already employs cross holdings ina  lot of erstwhile mining companies and the plan for buybacks and cross ownership is as old as the concept of BRIC economies