The recent volatility in the stock markets has prompted the Communist Party of India (Marxist) to support the BJP demand that participatory notes (P-notes) for investments in the Indian equity markets should be banned.The CPI(M) Politburo, which met here this morning, said: "The CPI (M) is of the firm opinion that P-notes should be prohibited as has been recommended by the RBI."An official statement issued by the CPM has reminded the UPA government about its commitments in the Common Minimum Programme (CMP). The Politburo has asked the government "to reverse the capital account liberalisation measures initiated by the erstwhile NDA government, and take concrete steps to reduce the vulnerability of the financial system to the flow of speculative capital as was promised in the NCMP." The key UPA supporter has dubbed the recent crash of the Sensex and the volatility in stock markets as a "serious concern."The statement said: "The Sebi proposals merely aim at reducing the proportion of non-transparent instruments like overseas derivative instruments in the total assets under the custody of the FIIs. The recommendation of the Tarapore Committee of phasing out P-notes altogether has not been accepted. The fact that even such a half-hearted measure by Sebi has led to massive pull-out of funds precipitating a huge fall in the markets only reflect the defiance of the FIIs towards regulatory institutions in India."The policy must move towards insulating the financial system from speculative finance capital, financial entities that are unwilling to meet the disclosure norms should not be allowed to participate in the capital markets. The UPA government should realise that the surge in FII inflows into India, encouraged by rupee appreciation and interest rate hikes, can eventually have serious adverse consequences."
