The Securities and Exchange Board of India executive director, Pratip Kar, has said that the Budget 1998 has provided long term fundamental support to the capital markets in the country, which cannot be fathomed immediately.
Kar was speaking at a panel discussion on the Union Budget, 1998, jointly organised by the Indian Chamber of Commerce and the Oberoi Grand, Calcutta.
Kar pointed out the strong indicators in the budget.
The first pointer went towards the disinvestment scheme in the public sector units, where he lauded the targets for mopping up Rs 5,000 crore which at the moment seemed achievable. "The sale of the PSU stake by the government will have a major impact on the Indian domestic capital market," he said.
The tightening of capital adequacy ratio to nine per cent in two years along with bringing down the level of non-performing assets to five per cent and the creation of a asset reconstruction fund, which are fallouts of the Narasimhan Committee report are bound to improve the functioning of the capital markets, he said.
He also pointed out that the annual accretion of Rs 8,000 crore to Rs 9,000 crore from provident fund would kickstart the dormant debt market in the country. He lauded the permission to carry out derivatives trading which would lead to growth of the securities market.
He mentioned that derivatives trading had been approved by Sebi, but needed amendment of the Contract Regulations Act to get started. Derivatives trading will be followed by index futures and subsequently by options trading and other forms of synthetic products very soon. He also mentioned that the proposed millennium bond from the Unit Trust of India and the resurgent India bond from the State Bank of India would necessarily build up the additional level of confidence among investors. "These will be dollar-denominated bonds and will serve as a new additional source of foreign funds into the country", he remarked.
The 100 per cent debt route permission to foreign institutional investors and allowing them to invest in unlisted debt securities is seen as an important window open to investors.
Speaking at the occasion, S L Rao, former director general of the National Council of Applied Economic Research emphasised that the in the present scenario, the country needs to improve its defence spending and the defence allocation of Rs 5,100 crore does not mean very much in an inflationary budget.
