A senior Reserve Bank official today opined that for the corporate bond market to develop in the country, the government should bring down its huge borrowing programme.
"If the government reduces its borrowing programme, fiscal consolidation happens, and then there is demand for corporate bonds," Executive Director Deepak Mohanty, who handles the monetary policy department at the central bank, told on the last day of the two-day ASEM (Asia-Europe meeting) Conference organised by the RBI and European Commission here.
Calling for policy changes and reforms in pension and insurance sectors to speed up this process of corporate bond market development, he said the huge funding needs for infrastructure development will be a big challenge for banks.
"If we reform our pension and insurance sector laws, that can lead to higher demand for corporate bonds, which will in turn help in financing infrastructure needs," Mohanty said.
The government has a set a huge Rs 4.57 lakh crore borrowing programme for this fiscal, taking the fiscal deficit to 5.5 per cent of the gross domestic product, which is higher than last fiscal. And despite a massive 3G spectrum and broadband haul of over Rs 1 lakh crore in May and June, the government has not revised downward its borrowing plan.
The government borrowings shot over the roof following the 2007-08 financial meltdown in the West and the resultant recession that the world economy was thrust into.