India’s Missed Play: The Need for an Aggressive SIF

 Rethinking Public Capital: Beyond Welfare and Infrastructure

India has long relied on public-sector institutions like LIC, EPFO, and state-run banks to mobilise domestic capital, but these funds have largely remained risk-averse and domestically focused. Despite the vast capital reserves available through District Mineral Funds (DMFs), insurance premiums, pension contributions, and state surpluses, there exists no truly aggressive and profit-seeking sovereign investment vehicle to channel this wealth into high-growth opportunities, particularly in emerging global markets.

While the National Investment and Infrastructure Fund (NIIF) was established to boost infrastructure financing, it still operates more like a traditional government agency: slow, bureaucratic, and domestically focused. What India needs today is a bold and outward-facing sovereign investment institution, backed by the Reserve Bank of India (RBI), that pools public funds for global investments, not only for economic returns but also for strategic influence.

Current Investments By India's Largest Public Fund Houses

Learning from the Best: The China and Singapore Model

Countries like China and Singapore have already mastered this game. China’s CIC (China Investment Corporation), with over $1.2 trillion in assets, holds stakes in global commodities, energy, infrastructure, and even technology firms across continents. Singapore’s Temasek Holdings, with a value exceeding $300 billion, owns shares in cutting-edge biotech companies, major banks, and even Western tech giants. These countries utilise their sovereign wealth funds not only to generate wealth but also to expand their soft and hard power, influencing trade routes, innovation flows, and even political alliances.

Comparision of International Funds With NIIF

India, meanwhile, stands as a passive observer. Ironically, much of India’s strategic infrastructure is now partially owned by foreign sovereign wealth funds, including the UAE’s ADIA and Canada’s CPPIB, while India itself holds little to no sovereign stake in foreign economies. This imbalance speaks volumes about missed opportunities and untapped ambition.

The Problem with Private-Led Investment Models

Today, India's limited exposure to high-return global investments has been largely facilitated by private players, including alternative investment funds (AIFs) and venture capital firms, which channel private and some public wealth into riskier sectors. But there’s a catch: these profits are privatised, while losses are often socialised. When these private ventures fail, it's often public-sector banks that absorb the hit through non-performing assets (NPAs), using taxpayer funds to write off bad loans. Essentially, the public pays for private failures.

By contrast, a publicly owned sovereign fund backed by the RBI but professionally managed could ensure that profits are returned to the state and the people, rather than siphoned off by a handful of elite investors. This could also reduce dependence on corporate bailouts and politically motivated lending by state banks.

Turning Surplus into Strategic Assets

The underutilised capital lying in District Mineral Funds across India can be reimagined as a seed corpus for such a fund. Similarly, state governments can pool unspent resources or surpluses, which can then be invested in foreign infrastructure projects, strategic minerals in Africa, renewable energy parks in Southeast Asia, or even AI and semiconductor startups in the West. Unlike current state subsidies or welfare schemes that offer short-term relief, these investments would generate sustainable long-term returns.

Rather than each state trying to create its version, leading to policy loopholes, corruption, or inefficiency, a centralised, aggressive investment institution monitored by the RBI can ensure coordination, risk oversight, and efficient capital deployment. The resulting profits, whether from global dividends, asset appreciation, or equity stakes, can then be equitably distributed among the participating states, creating a new model of fiscal federalism based on capital returns rather than handouts.

Pride, Power, and the Soft Capital Game

Owning a sovereign investment fund is not just an economic necessity; it is a matter of national pride and strategic identity. Just as countries take pride in owning global brands or winning diplomatic battles, India must seek pride in owning assets and influence abroad, built through the pooled strength of its people’s savings. This new institution could serve as India’s financial diplomacy arm, creating economic allies through investment rather than aid or rhetoric.

Strategic Investment Opportunities For Indian Funds

Public protests may arise, especially from critics who prefer a pure welfare-driven state model or who equate public capital with domestic-only spending. But the global reality is changing. In an interconnected world, capital is power, and those who deploy it strategically will shape the international order. India can no longer afford to keep its capital confined within its borders while allowing foreign sovereign funds to profit from its markets.

Why Inward-Only Investment Is Not Enough: The Risk of Technological and Strategic Dependency

While the government may argue that investing public capital locally ensures employment generation and local economic development, such an approach, though important, is no longer sufficient in a globally competitive landscape. A purely inward-looking investment strategy leaves India vulnerable to technological backwardness, where we become consumers and not creators of emerging technologies. Without targeted investment in key global sectors such as AI, semiconductors, critical minerals, green hydrogen, and advanced manufacturing, India risks being reduced to a supplier of cheap labour and raw materials, while foreign powers reap the strategic and financial benefits.

Holdings of International Funds In India

Moreover, the lack of sovereign economic leverage abroad also undermines India’s internal economic security. During times of geopolitical stress or economic downturn, nations that own foreign assets can bargain from a position of strength. Countries like China and the Gulf states have repeatedly used their foreign investments as tools of soft and hard power, shaping agendas and negotiations to their advantage. If India continues to avoid building sovereign stakes in other economies, we risk being strong-armed or cornered in future global crises, forced into reactive diplomacy instead of proactive statecraft. Holding sovereign equity in global value chains, ports, digital infrastructure, and resource basins gives India the strategic autonomy to resist coercion and shape the world on its terms.

Why Now? Why Under the RBI?

Launching such a fund now, during India’s most geopolitically ambitious phase, would be symbolic of a new India that is not just a market for others but also a stakeholder in global wealth creation. The RBI’s oversight would instil trust among cautious investors, such as LIC, state banks, and pension funds, enabling large-scale capital aggregation. At the same time, a professional management structure with market-linked incentives can ensure aggressive performance and avoid bureaucratic sluggishness.

Conclusion: From Welfare to Wealth Creation

India is at a fiscal crossroads. Continuing down the path of populist expenditure and inefficient capital allocation will lead to mounting debt without sustainable returns. On the other hand, creating a profit-oriented sovereign investment institution, anchored in the RBI, fueled by public capital, and driven by strategic intent, offers a way to transform India from a capital consumer to a creator of global wealth.

It’s time to stop selling public assets to foreign funds and start building our own. A sovereign wealth fund is not just a financial entity; it’s a tool of national resurgence, economic sovereignty, and geopolitical strength.