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India now has a sovereign wealth fund. The National Investment and Infrastructure Fund (NIIF) will soon get a chief executive even as negotiations are on with strategic investors to put in capital above the 20,000 crore a year that the government has promised. This money will be leveraged through debt.

Governments are generally bad at picking investment opportunities. The key to the success of NIIF will be governance. Money is to be put not just into asset management companies that buy infrastructure assets but also private projects, both new and stalled. It is thus important that the fund managers are given operational freedom to invest in the most attractive opportunities.

The traditional phone calls from New Delhi that have led to so much trouble for Indian banks should have no scope to succeed in the case of NIIF. That also means that the governing council should not be dominated by political appointees. NIIF will succeed only if crony capitalism is kept at bay.

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