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Even as foreign institutional investors rapidly pull out their money from Dalal Street, Norway's sovereign wealth fund, the world's second largest, is set to invest $2 billion in Indian stocks.
The Bombay Stock Exchange's benchmark Sensex has been in a free fall this year, dipping below 10,000 last week, but the Norwegian government said the investments by the Government Pension Fund would take place between this month and January 2009.
The Norwegian Pension Fund, which has assets of $350 billion, is the world's largest sovereign wealth fund after only the Abu Dhabi Investment Authority, credited with assets of over $875 billion.
Norway's deputy secretary general in the ministry of finance, Thorvald Moe, met officials in the ministry of finance today.
He said India had assured him that an updated double taxation avoidance treaty, which had been last signed between Norway and India in 1986 when the economic climate in India was very different, was on the anvil and could be ready as early as January next year.
Moe said the pension fund's managers recently increased India's weight from 0.2 per cent to 0.94 per cent because they see "potential in India, though its financial markets still have a long way to go".
Moe added that the fund would invest in those companies that meet guidelines
Last year, British company Vedanta Resources Plc (Vedanta) was excluded from the fund, based on a recommendation from the Council on Ethics for the Fund.
The Council on Ethics had concluded that Vedanta was causing serious damage to people and the environment as a direct consequence of its activities in India.
The Council examined four Vedanta Indian subsidiaries -- Sterlite Industries, Madras Aluminium Company, Bharat Aluminium Company, and Vedanta Alumina. Vedanta holds a majority share in all these companies.
Moe said Norway was enthusiastic about the major expansion of the sovereign fund in India, adding that this was "more than just a strategic investment".
The Government Pension Fund, which is fully integrated with the state budget, comprises revenues from petroleum, of which only the real return on the fund 4 per cent is invested.
Moe also said Norway planned to invest more in projects that took forward the Clean Development Mechanism, as part of the Norwegian initiative on sustainable development, with special emphasis on solar energy. Institutions like Teri would partner the Norwegian government in this effort.
