Industry body ASSOCHAM said that allowing foreign direct investments in the pension sector will enable the country to raise the share of fund assets to GDP from current level of 5% to 17% which in turn can result in assets worth USD 166 billion (about INR 860,000 crore).

FDI in pension funds will further increase the volume of assets that can be invested into infrastructure. India requires USD 1 trillion (about INR 5,200,000 crore) for infrastructure investments during the 12th Five Year Plan (2012-17).

The global funded pensions market (both occupational and work related) is estimated at USD 24.6 trillion of which USD 16.2 trillion are held by pension funds. Permitting FDI in pension funds will give access to global pension fund companies to the vast untapped Indian market, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its recent study titled ‘Case for Allowing FDI in Pension Funds.’

A 2.1% allocation of total pension fund assets to India will increase its reserves to USD 342 billion about the same in Brazil in 2010. Mr DS Rawat secretary general quoting the study said that “Going by the world trends, equity allocation of these could be as high as 160 billion dollars. A CAGR of 16.5% as witnessed in Brazil will result in total pension assets of USD 734 billion of which equity will be USD 345 billion.”

Even if one third of it goes into infrastructure development, it will mean an investment of over 100 billion dollars or one tenth of total requirement in the 12th Plan period. At present, pension and insurance funds have a limited presence in the Indian markets due to regulatory restrictions.

In 2011-12, only 4.7% of funding requirement or INR 13,289 crore is likely to have come from pension and insurance funds compared to 10.5% or INR 29,851 crore from external commercial borrowings. The estimated debt requirement is to the tune of INR 284,000 crore in current fiscal and INR 988,000 crore in the 11th Five Year Plan.