| Prime Minister Manmohan Singh with finance minister P. Chidambaram and Sebi chairman M. Damodaran (right) in Mumbai on Friday. (AFP)
Mumbai, Oct. 6: Prime Minister Manmohan Singh today said the government would continue to push for financial sector reforms and strive to quell opposition by trying to build a consensus.
Singh said there was a need to debate all aspects of reforms — even the most controversial aspects of the reforms process —in order to create a “collective understanding”.
Singh, who is regarded as India’s chief architect of reforms, said his government would push for reforms in the two key areas of pensions and insurance — both areas where he has faced strong opposition from the Left.
The Prime Minister, who inaugurated a spanking new headquarters of the Securities and Exchange Board of India (Sebi), said there was a need to promote a widely held pension fund system and create a much larger insurance sector with a higher capital base and more diverse products.
“It is these which will generate the necessary long-term funds for investing in a debt market and make available resources for the investment needs of our country, particularly in infrastructure. If we have to achieve our growth ambitions of 8 to 10 per cent per annum, we need investments of a high order. These would be possible only by making our financial markets more efficient, more competitive and more global,” he said.
The government has been seeking to raise the limit on foreign direct investment in the insurance sector to 49 per cent from the existing 26 per cent, but has been facing opposition from the Left, its alliance partner.
Lack of consensus
Admitting that there may be a lack of consensus, Singh expressed the optimism that the country would, in the long run, be able to forge a meaningful consensus and take reforms in the financial sector forward. “The financial sector in India has now come of age even though there are a number of issues which need to be resolved. Indeed, it is such issues, even if they be controversial, which encourage discussion and debate and result in furthering our collective understanding. This is the basis of ensuring a healthy progress,” he said.
Flanked by finance minister P. Chidambaram, Reserve Bank governor Y. V. Reddy, Sebi chairman M. Damodaran, Planning Commission deputy chairman Montek Singh Ahluwalia, and C. Rangarajan, chairman of the Economic Advisory Council, Singh raised certain critical issues facing India’s financial sector, thereby setting a tone for the regulators.
Deeper debt market
The Prime Minister said appropriate policy measures should be taken to make the debt market deeper, broader and more liquid. “The capital market is not about equities alone. The bulk of transactions in the capital markets of advanced nations are in debt securities…However, in our experience, debt markets in India have not quite delivered on expectations,” he said.
On a day when the sensex finished lower by 17 points, the Prime Minister revealed that the government planned to undertake a comprehensive amendment of the Sebi act to create an investor education fund. This fund will be financed from the fines and penalties levied by the market regulator.