India's Investments: Where Does The Government Spend?

India's government has invested in a range of sectors, including infrastructure, defence, manufacturing, and social welfare schemes. The country has one of the world's fastest-growing economies, and the government has implemented various initiatives to attract foreign investment and boost domestic investments. India's private equity and venture capital investment environment is scaling new heights, with notable deals in the tech, automotive, and renewable energy sectors. The government has also introduced several investment schemes to encourage responsible economic behaviour among its citizens.

The National Investment and Infrastructure Fund (NIIF)

NIIF was established as an Alternative Investment Fund in 2015, with an inflow of ₹20,000 crore from the Government of India, amounting to a 49% stake. As of April 2024, NIIF has over US$4.9 billion in assets under management, with a total of about \$5 billion in capital commitments across four funds. These funds include the Master Fund, Private Markets Fund, Strategic Opportunities Fund, and the India-Japan Fund, each with distinct investment strategies.

The Master Fund, NIIF's largest infrastructure fund in India, focuses on core infrastructure and operating assets in sectors such as roads, ports, airports, and power. The Private Markets Fund invests in funds managed by third-party managers in infrastructure and associated sectors. The Strategic Opportunities Fund invests in and develops large-scale businesses and greenfield projects of strategic importance to the country. The India-Japan Fund, NIIF's first bilateral fund, focuses on environmental preservation and fostering collaboration between Indian and Japanese companies in India.

NIIF has successfully collaborated with leading global and domestic institutional investors and operating partners, providing stability and a long-term vision to its partners. It has demonstrated its capacity to control and operate companies and assets, investing in successful businesses that contribute to India's growth. NIIF's investments have facilitated sustainable public-private collaboration, with access to differentiated opportunities through its unique strengths and seasoned leaders with diverse experience and strong networks.

NIIF's investments have played a crucial role in India's economic growth, particularly in infrastructure development, and have attracted both domestic and foreign investments. The fund's collaboration with international and local companies has positioned it as a significant contributor to India's thriving investment landscape.

The India Industrial Land Bank (IILB)

The IILB is designed to be a user-friendly platform, utilising Geographic Information System (GIS) technology. GIS is a computer system that captures, stores, analyses, and displays data related to positions on Earth's surface. By relating disparate data sets, GIS helps users understand spatial patterns and relationships. This technology enables the IILB to provide comprehensive information on various aspects of industrial areas and clusters across India.

The Department for Promotion of Industry and Internal Trade (DPIIT) developed the IILB portal to promote resource optimisation, industrial upgrading, and sustainability. The portal is part of the government's efforts to streamline processes and provide easy access to critical information for investors. It also links to various state GIS portals and state land banks, offering a comprehensive view of industrial land availability across the country.

The introduction of the IILB is in line with the government's focus on making it easier to do business in India. This initiative, along with other government measures such as the National Logistics Policy and the Phased Manufacturing Programme, is expected to contribute to India's goal of becoming a $5 trillion economy by 2025.

The Atal Pension Yojana (APY)

The APY offers flexibility, as subscribers can opt to decrease or increase the pension amount during the accumulation phase, once a year. Additionally, subscribers can choose the mode of contribution (monthly, quarterly, or half-yearly) and change it once a year during the month of April. The contributions can be made through an auto-debit facility from the subscriber's savings account. It is important to note that subscribers should maintain the required balance in their accounts to avoid overdue interest charges for delayed contributions.

The Government of India co-contributes to the APY for eligible subscribers who joined the scheme between June 1, 2015, and March 31, 2016, and who are not covered by any statutory social security scheme or income tax payers. The government co-contribution is payable for five years and will be credited to the subscriber's savings account. The benefit of the minimum pension under the APY is guaranteed by the government, ensuring that any shortfall in actual realized returns is funded.

To open an APY account, individuals can approach their bank branch or post office and fill out the registration form. Providing Aadhaar and mobile number details is optional but recommended to facilitate communication and updates. It is mandatory to provide nominee details, with the spouse being the default nominee for married subscribers.

The National Pension Scheme (NPS)

The National Pension System (NPS) is a government-backed, market-linked voluntary contribution scheme that helps people save for their retirement. It is one of the most efficient ways of boosting retirement income and is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

The NPS is based on a unique Permanent Retirement Account Number (PRAN) which is allotted to every subscriber. The scheme is reassuring from a security point of view and offers attractive benefits for account holders. It is also one of the lowest-cost investment products available.

The NPS offers flexibility, allowing subscribers to select or change the Point of Presence (POP), investment pattern, and fund manager. Subscribers can also choose to invest across various asset classes, including equity, corporate bonds, government securities, and alternative assets.

The NPS provides tax benefits for both salaried and self-employed individuals. Taxpayers can claim exemptions under section 80CCD (1B) and 80C of the Income Tax Act, 1961.

There are two types of NPS accounts: Tier I and Tier II. Tier I is the pension account, where contributions up to INR 50,000 are eligible for additional tax deductions. Withdrawals from this account are restricted and subject to terms and conditions. Tier II is an additional voluntary investment account, and subscribers can withdraw the entire accrued corpus at any time.

The NPS is open to all Indian citizens aged between 18 and 70, as well as Non-Resident Indians (NRIs) and Overseas Citizen of India (OCI) cardholders.

The Sovereign Gold Bonds (SGBs)

Sovereign Gold Bonds (SGBs) were launched by the Indian government in November 2015 under the Gold Monetisation Scheme. The Reserve Bank of India (RBI) issues the bonds in consultation with the Government of India (GOI), with the subscription open in tranches. The RBI declares the rate of SGB before every new tranche by issuing a press release.

The Sovereign Gold Bond Scheme offers an alternative to investing in physical gold, providing investors with the benefit of capital appreciation and interest earnings. The bonds are denominated in multiples of grams of gold, with a basic unit of 1 gram and a minimum permissible investment of 1 gram. The maximum limit for subscribed gold is 4 kg for individuals, 4 kg for Hindu Undivided Families (HUFs), and 20 kg for trusts and similar entities per fiscal year (April-March). The tenor of the bond is eight years, with an exit option in the fifth, sixth, and seventh years.

The bonds are restricted for sale to resident Indian entities, including individuals, HUFs, trusts, universities, and charitable institutions. Investors must provide a PAN number, and Know-Your-Customer (KYC) norms are the same as those for purchasing physical gold. The interest on the gold bonds is taxable under the Income Tax Act, 1961, but the capital gains tax is exempted if the bonds are held until maturity.

The redemption price is based on the simple average of the closing price of gold with 999 purity over the previous three working days, as published by the Indian Bullion and Jewellers Association (IBJA). The bonds can be used as collateral for loans, and they are tradable on stock exchanges within a fortnight of issuance.

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