Indian PM calls for market reforms

Mumbai, October 6:

Prime minister Manmohan Singh warned on Friday that India’s financial markets must become more competitive and efficient to boost investment and help meet the government growth targets.

“If we are to achieve our growth ambitions of 8-10 per cent, we need investments of a high order,” Singh said at the opening of new corporate headquarters of market regulator the Securities and Exchange Board of India (SEBI).

“This is possible only by making our financial markets more efficient, competitive and global,” Singh added. The premier, credited with masterminding India’s economic liberalisation, said debt market reforms had lagged behind.

“The bulk of transactions in the capital markets of advanced nations are in debt securities. Debt markets in India have not delivered on expectations,” Singh said. “Policy measures need to be undertaken to make it deeper, broader and more liquid. We need to reform our financial sector further,” he added.

Despite years of liberalisation in India, a foreign investor is not allowed to hold more than five per cent in a private sector bank or more than 26 per cent in a local insurance venture.

Foreign participation in the securities markets is freer but limited to $1.5 billion in corporate bonds and two billion dollars in federal bonds.

India’s finance minister stressed for measures to improve investor confidence. “We need to focus on investments. Our country is full of savers, no investors,” Palaniappan Chidambaram said.

Experts estimate that 3.0-4.0 per cent of India’s population of 1.1 billion plus people invests in the financial markets. Chidambaram said he wished India’s self-regulatory organisations (SRO) were more efficient and called for stricter disclosures by market intermediaries to SROs.

India boasts the world’s second-fastest growing economy after China and an 8.9 per cent expansion in the first quarter to June. Economists are forecasting growth of around eight per cent for the full-year to March 2007.