SEBI’s Silver Jubilee Celebration : Prime Minister Mr. Manmohan Singh’s Speech
'' The high growth rates that the Indian economy has witnessed in the last decade or so have
been driven by enhanced savings and investment rates.
Gross Domestic savings (GDS) as a percentage of GDP increased from 23.7 per cent in 2000–01 to 36.8 per cent in 2007–08. It decreased thereafter to 30.8 per cent in 2011-12 and we must bring it back to the earlier levels.
Higher savings and investment rates are most productive when there is effective intermediation
through well functioning capital markets.
The imperative of growth requires an increasing proportion of savings getting channelized
into financial assets to facilitate their deployment in the most productive uses. It is a matter of
concern that financial savings as a percentage of GDP have declined recently.
In times of uncertainty doubts often arise regarding the likely real returns on financial assets. Individuals prefer to hold physical assets like gold or housing. This is to some extent due to the
macroeconomic difficulties we have experienced over the past two years. It is important to reverse
this trend and we are taking steps in that regard.
Inflation Indexed Bonds..!
For mobilising savings into productive uses, retail investors must have the incentive to
invest in financial assets such as securities, insurance, banking and pension products. The
Government and the financial sector regulators both have to take action to ensure this outcome.
The moderation of inflation we are seeing will help.
The inflation indexed bonds announced by the Finance Minister in the Budget for this year and the recent measures announced by SEBI to encourage small investors to participate in the securities market are other important efforts in this direction.
One of our problems is that the majority of Indian households do not participate in financial
markets. A recent study showed that the distribution of participation is also un-even across the
country, with 55% of all investors coming from the western region. Hence, mobilization of
household savings into productive investment in the capital market must be a key goal for all
actors in the financial sector, including SEBI.
SEBI can also make a vital contribution to the revival of the economy & towards laying the
foundations for more rapid growth by facilitating infrastructure related investment. India needs
infrastructure funding of about 1 trillion (1 Trillion = 1 lac Crore) US dollars in the period 2012 to 2017. Out of this, about 50 percent would have to be met by the private sector and financial institutions. I would urge SEBI to take a lead role in ensuring that infra debt funds (IDFs) are established and face a supportive regulatory environment.
Foreign Investors..!
I also understand that SEBI has been working to make it easier for foreign investors such as
central banks, sovereign wealth funds, university funds and pension funds to invest in India. This is
an area which needs priority attention, especially in view of the current macro-economic
environment in our country. I would urge the Board to quickly bring to fruition the initiatives that are
already underway in this regard.
The equity market in our country remains disproportionately focused on large-cap firms. Many
mid cap and small tier companies are crowded out by their larger counterparts while seeking
public capital.
For our growth story to be sustainable in the years to come, small and medium
enterprises would need to become a key segment of the Indian economy. They must be facilitated
to grow and expand with greater ease. I am happy that SEBI has been making efforts towards
enhancing access of mid-cap and small tier companies to capital markets. I hope to see more
such efforts in the future.
A weakness in our system relates to the market for corporate debt. While the market for
government debt is very large, the market for corporate debt has yet to develop as it should. It is
not large enough and not liquid enough. To some extent the reduction in the fiscal deficit is a precondition for this development since sovereign debt crowds out private debt. Efforts are being
made to reduce the fiscal deficit and as we succeed we can expect the corporate debt markets to
expand. But we need other initiatives also.
SEBI has issued regulations on issuance, listing and trading of debt securities to
encourage mobilization of resources through public issuance of debt. While the creating a
dedicated debt segment in stock exchanges will ensure greater institutional participation in trading,
I would urge SEBI to ensure that good quality debt issuances are encouraged and a larger number
of corporates access the debt market for financing.
The size and sophistication of the Indian securities market has been increasing at a
very rapid pace. Every day, we see the development of new products with greater complexity than
ever before. Developments in technology have resulted in speedier trading processes.
Simultaneously, the number of entities that SEBI needs to regulate continues to go up. All this
points to the need for SEBI to constantly upgrade and improve. It is only by building its human
and technological capabilities that the Board can fulfil its mandate of delivering strong
enforcement. A key indicator of SEBI's future effectiveness will be its ability to root out the hard-todefine but extremely pernicious disease of insider trading.
National Institute of Securities Markets..!
I am happy that SEBI has over the years nurtured and supported under its auspices the
National Institute of Securities Markets (NISM) to promote securities market education and
research. It is also heartening to note that the Government of Maharashtra has allotted 70 acre of
land for the new campus of NISM at Pathalganga, Navi Mumabi.
The NISM will have, a state-of the art residential campus catering to 1,000 students at a time. The Institute is expected to play a pivotal role in implementing the National Strategy for Financial Education (NSFE).
Regulation of the securities market is a complex exercise. In the ultimate analysis, such regulation
should be guided by the need to increase transparency and lead to higher investments being
channelized into productive endeavours, which strengthen our economy. SEBI as a regulator has
the responsibility to ensure that this outcome is achieved, while at the same time ensuring that the
interests of investors and other stakeholders in the securities market are protected. Our
Government remains committed to doing everything that is needed to strengthen SEBI so that it
can deliver even more effective enforcement.
I commend SEBI for its stellar performance in all these dimensions in the past 25 years. I
wish it even greater successes in the time to come.
Thank you.''
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