FICCI HAS requested the government to consider setting-up of Global Technology Acquisition Fund’ (GTAF) for Indian SME manufacturers out of the existing foreign exchange reserves. 

 

“Such a Fund would fast track the development of technology in domestic SME manufacturers and enable them to acquire latest technology without getting into the expensive, risky and long developmental process of technology” said Dr Amit Mitra, secretary general, FICCI in its representation to National Manufacturing Competitiveness Council (NMCC).

 

The GTAF fund could be formed from the existing foreign exchange reserves of the economy, which would not only ensure optimal utilization of forex reserves but also help the economy manage the growing problem of forex inflows.

 

The support provided through this fund to Indian SMEs would enable them to acquire high technology or high technology companies abroad. Regarding corpus of the fund, FICCI stated that if 2% of SME production is taken as a yardstick for investment in technology, then the fund amount comes to around Rs 5500 crore or $1.4 billion, which is less than 1% of our existing forex reserves. $1.4bilion will be the annual fund requirement and it could be subject to review by the government over the years.

 

FICCI has suggested that there is a need to form a SPV (Special Purpose Vehicle) for GTAF, which will borrow the Rupees from RBI by issuing securities and then buy the dollars from RBI in the foreign exchange market to lend it further to the manufacturers. Such a mechanism would be inflation and liquidity neutral, as it would help in taking out some dollars from the country, thereby easing the pressure on Rupee, FICCI pointed-out.

 

Regarding operationalistion of fund, FICCI said that Indian SME manufactures, could acquire technology in the form of knowhow, patent, proto-type and design etc under the fund. Expenditure related to license cost, purchase of patents and training element associated with the project could be considered as eligible expenditure for support under the fund, FICCI said. 

 

However, this support for technology should not be restricted to only business-to-business technology acquisition but also need to include acquisition of technology by Indian SME from a university or research institute abroad, FICCI emphasised. Technology that is to be acquired has to be a proven one and commercially produced in the country of origin, said FICCI. Also, the technology must be immediately adopted in company’s manufacturing activity.

 

The fund could consider supporting either 50 per cent of technology acquisition cost or $2 million, whichever is lower, FICCI pointed-out. Given the technology deficit in Indian SME manufacturers, such a fund could be a significant step forward in removing this deficit. “Also, to make India a technology superpower it is important that we not only depend on indigenous development of technology but also the acquisition of technology in the global market”, said Dr Mitra.

 

FICCI further said that worldwide, countries are operating funds in which they allocate their excess forex reserves. The accumulation of official reserves far beyond established benchmarks of reserves adequacy has led to an increasing number of countries to allocate their excess reserves to Sovereign Funds. Currently, the size of these Sovereign Funds is valued at somewhere between in the range of $2.2 trillion to $3.2 trillion, and is expected to soar to $10 trillion in next 10 years.