Growth hinges on reforms: PM

Prime Minister Manmohan Singh on Friday set the ball rolling for the targeted 8-10 per cent growth of the Indian economy by calling for further reforms in the financial sector.

Prime Minister Manmohan Singh on Friday set the ball rolling for the targeted 8-10 per cent growth of the Indian economy by calling for further reforms in the financial sector.

Singh made it clear that more financial sector reforms are needed to deepen the markets in order to facilitate the required growth. 8220;If we have to achieve 8-10 per cent growth we need investments of a high order. These would be possible only by making our financial markets more efficient, more competitive and more global,8221; the PM said while inaugurating the Securities and Exchange Board of India8217;s Sebi new headquarters at the Bandra-Kurla Complex here today.

8220;In our experience the debt market has not quite delivered. We need to understand why, and to take policy measures to make it deeper, broader and more liquid. While regulations may help in this direction to some extent, we need to reform our financial sector further if we are to have a larger debt market,8221; he said.

While foreigners can enter and exit India8217;s stock market, they can8217;t hold more than 1.5 billion in corporate bonds and 2 billion in government bonds. The The market is undeveloped due to a lack of sophisticated hedging tools, and investors have to cover any short positions before the close of trade.

8220;The bulk of capital markets in advanced nations are in debt securities,8221; Singh said, adding that a lively corporate securities market would help the banking system price current and future assets accurately and help mitigate risks.

He also called for the need to promote a widely held pension fund system and the need for a much larger insurance sector with a higher capital base and more diverse products. Foreign investors are not allowed to hold more than 26 per cent in an insurance company.

The PM also asked Sebi to fully protect investors8217; interests. Singh said he was happy that urgency was being given to amend the Sebi Act to create an appropriate investor protection fund as well as further empowering the market regulator to address issues impacting investors8217; interest.While appreciating Sebi8217;s efficiency in shouldering the responsibility of a regulator, he felt that the regulator was somewhat handicapped in its efforts to promote investor education due to lack of access to a suitable investor protection fund.