* Proposals to spend all fiscal reserves "deeply mistaken" - Putin
* Russia keeps intact limit on domestic investments by National Welfare Fund
* Approves $4.6 billion in additional infrastructure projects
By Darya Korsunskaya and Jason Bush
NOVO-OGARYOVO, Russia, Nov 6 President Vladimir Putin said on Thursday that Russia should not spend all of its fiscal reserves, lending support to fiscal conservatives who favour keeping most rainy-day funds invested in low-risk foreign assets.
Putin was addressing a meeting to discuss the use of the National Welfare Fund, an $89 billion stash of energy revenues that has been saved to cover the rising long-term cost of state pensions.
"The National Welfare Fund is a security cushion for the Russian economy ... Those who suppose that we should allow ourselves to spend this fund entirely are deeply mistaken," Putin told senior officials at his official residence.
Putin appeared to be responding to proposals, reported in the Kommersant daily on Thursday, under which the government would commit most of the money to infrastructure projects.
The NWF and its sister Reserve Fund were created by former Finance Minister Alexei Kudrin, who restored the public finances to health in the first decade of the millennium but was forced out of office in 2011.
With the economy slowing, calls have grown to plough more NWF cash into infrastructure that proponents argue could boost growth in both the short and long run, much as the post-war construction of the U.S. interstate highway network did.
Economists warn however that, in a country with a history of official corruption and mismanagement, money could end up being wasted rather than put to good use.
Benefits from improved road and rail links would accrue mainly to the wider economy rather than the NWF, warned Evsei Gurvich, head of the Economic Expert Group, a thinktank that advises the Finance Ministry.
"We should realise that we will need a return from the National Welfare Fund to support the pension system," Gurvich told Reuters.
Thursday's meeting rejected proposals to increase the share of the National Welfare Fund that could be invested in domestic infrastructure to 50 or 60 percent, Deputy Prime Minister Igor Shuvalov said afterwards.
Under present rules no more than 40 percent of the Fund can be invested in Russia, a rule that is designed to diversify its investments to diminish risk.
Presently around two-thirds of the Fund is held in low-risk bonds of western governments. The remaining third is largely deposited at state development bank VneshEconomBank.
Russia's other sovereign wealth fund, the $87 billion Reserve Fund, is entirely invested abroad.
Whereas the Reserve Fund has a mandate to support the budget in the event of a fall in oil prices, requiring a conservative investment strategy, the National Welfare Fund has a vaguer mandate to secure the state pension system.
The Finance Ministry favours keeping most of the fund in liquid assets that could be easily tapped. But the Economy Ministry argues that it should be invested in growth-promoting projects. Putin came down somewhere between the two.
He has backed proposals that have circulated to invest NWF cash in infrastructure bonds that would finance major projects.
"Holding reserves only in the form of securities and liquid money in bank accounts is insufficient," Putin said.
"We also need other instruments, able to secure both the income of the financial reserves, and also their more active work in the interests of the development of the Russian economy, for stimulating investment."
Boosting funding for such projects via the National Welfare Fund represents a way for the government to stimulate flagging economic growth, while formally complying with fiscal rules that limit its ability to boost budget spending.
The government approved an additional 150 billion roubles ($4.6 billion) in infrastructure investments by the Fund, a ring-road in the Moscow region, the Baikal-Amur railway in the Far East, and upgrading the Trans-Siberian railway. (Reporting by Darya Korsunskaya; Writing and reporting by Jason Bush; Editing by Douglas Busvine)