Govt officials, bourses to discuss Jalan panel proposals

The recommendations of the committee, headed by former Reserve Bank of India (RBI) governor Bimal Jalan and submitted to market regulator SEBI in November last year, would be discussed at a workshop organised by the industry chamber Ficci in New Delhi

New Delhi: Senior government officials and top stock exchange executives will discuss on Friday the long-pending proposals made by a Securities and Exchange Board of India (SEBI)-appointed panel for sweeping changes on how the bourses should be owned and run, reports PTI.

The recommendations of the committee, headed by former Reserve Bank of India (RBI) governor Bimal Jalan and submitted to market regulator SEBI in November last year, would be discussed at a workshop organised by the industry chamber Ficci here.

Those expected to participate in the discussions include economic affairs secretary R Gopalan, joint secretary (capital markets) Thomas Mathew, and Mr Jalan himself.

Besides, top executives of three national stock exchanges—NSE, BSE and MCX-SX—as also representatives from a host of smaller bourses and other market entities are expected to be present alongside other industry experts.

The implementation of the recommendations made by the Jalan committee has been pending for almost a year now.

Among other proposals, it has strongly recommended capping the profitability of bourses and barring them from getting listed to safeguard their front-line regulatory role.

The committee, set up in January 2010 for review of ownership and governance norms for market infrastructure institutions, submitted its report to SEBI in November last year. SEBI then invited comments on it till 31st December.

The proposals generated intense debate and opposition was raised to proposals like non-listing of bourses and cap on profitability, terming them as anti-investor measures.

In the wake of stiff opposition to the proposals, SEBI later put the ball in the government’s court.

Thereafter, a committee was set up by the ministry of corporate affairs (MCA) to discuss the proposed rules, which held its consultations in May.

In its meeting with the representatives from the bourses, industry bodies, accounting bodies and other market entities, the MCA sought suggestions a roadmap for segregation of regulatory and commercial roles of the exchanges.

It was proposed that steps need to be taken to keep the front-line regulatory role of the bourses unaffected by their profit-making and other business interests after they become publicly held companies following their listing.

On its part, the SEBI board has not been even discussing the matter in its last few board meetings, as it was waiting for suggestions from the government on the contentious issues emanating from the Jalan committee proposals.

It is expected that the matter could come up for the SEBI board’s consideration in its next meeting, once the government takes a final view after consultations with various parties.

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Govt hikes FY11-12 borrowing plan by Rs52,800 crore to Rs4.7l lakh crore

The increase in the government’s borrowing plan has been necessitated due to a switch taking place from National Small Saving Funds (NSSF) into dated securities, economic affairs secretary R Gopalan said

New Delhi: The government on Thursday announced that it will increase its market borrowings by Rs52,800 crore to Rs4.7 lakh crore in 2011-12, but said the fiscal deficit target of 4.6% remains intact, reports PTI.

“We are increasing the gross borrowings for the second half (of the fiscal) by Rs52,800 crore. The reason is...small savings collection has gone down...,” economic affairs secretary R Gopalan told reporters here.

With this, the gross market borrowing for the full fiscal 2011-12 will rise to Rs4.7 lakh crore, up from the budgeted Rs4.17 lakh crore. In the previous fiscal, the gross borrowing was Rs4.37 lakh crore.

In the first half of this fiscal (April-September), the government had borrowed Rs2.5 lakh crore through dated securities.

Now, in the October-March period, the scheduled borrowing would be Rs2.2 lakh crore. The net borrowings will work out to around Rs4 lakh crore for the entire fiscal.

Mr Gopalan said the fiscal deficit target of 4.6% of the gross domestic product (GDP) (Rs4.12 lakh crore) will remain intact even as the borrowings increase.

“There is switch taking place from National Small Saving Funds (NSSF) into dated securities. Also we need to work to shore up the cash balance. It has nothing to do with fiscal deficit computation. The target of fiscal deficit remains unchanged,” he said.
Mr Gopalan said there was an increased need to go for dated securities, instead of depending on small savings, as the government had to bridge its fiscal deficit.

The finance ministry also said that borrowing calendar has been programmed in such a way that there remains enough credit for the private sector.

Overall, officials said, small savings have gone down because the interest rates offered by banks are higher than those offered by instruments such as the post office schemes.

Budget calculations were made with estimation of Rs24,000 crore in NSSF, but instead the fund dipped by Rs35,000 crore, a ministry official said.

On the other hand, the government’s opening balance was only about Rs16,000 crore, as against the expectations of Rs24,000 crore due to withdrawals by different departments in the last 15 days of March.

On whether additional market borrowings will squeeze out credit for private sector, the official said, “The borrowing calendar has been planned in such a way private sector borrowings are not crowded out.”

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Difficult to achieve fiscal deficit target: PMEAC chief

Despite a stronger agricultural growth than what was estimated earlier, the economy is expected to grow about 8% during the current fiscal as there are serious concerns, PMEAC chairman C Rangarajan said

New Delhi: Prime Minister’s Economic Advisory Council (PMEAC) chairman C Rangarajan on Thursday said the government is likely to miss the fiscal deficit target of 4.6% for the current fiscal as growth is expected to moderate, reports PTI.

“In the current year, the budgeted fiscal deficit is 4.6% (of GDP). It is going to be difficult to achieve this. All the numbers do not gel well,” he said, while delivering lecture at golden jubilee celebration of Indian Economic Service here.

“But I think it should be one of efforts to ensure that fiscal deficit is in the lines of what was estimated,” he said.

The economic growth was earlier estimated at 8.2% for the current fiscal.

Despite a stronger agricultural growth than what was estimated earlier, he said the economy is expected to grow about 8% during the current fiscal as there are serious concerns.

“Therefore, taking all these factors into account, I believe the growth rate of the economy can be close to 8% per annum,” he said.

He said the potential growth rate of Indian economy is 9% given the saving and investment rate.

Highlighting the challenges, Mr Rangaranjan said, “I believe there are short-term concerns and medium-term constraints which will come in the way of achieving 9% growth.”

There are three short-term constraints—one is inflation, the second is balance of payment and the third area is fiscal consolidation.

On rate of price rise, he said, “I believe even if inflation is triggered by supply side constraint monetary policy has important role to play.”

When food inflation persists for some time then it gets generalised, he said, “In fact today the non-food manufacturing index exceed 7.5%. Therefore, we should be using monetary policy to tame inflationary expectations,” he added.

Defending the number of rate hikes effected by the Reserve Bank of India (RBI), he said, “We should use monetary policy in way that demand preference is brought down.”

Since March 2010, the central bank has raised policy rate 12 times to tame inflation.

On the Current Account Deficit (CAD), he said, “I don't think that by taking both imports and exports of goods and services taken together we might exceed 2.5% of gross domestic product (GDP) of the CAD this year.”

So far, financing of CAD has not been a problem, Mr Rangarajan said, adding, “The approach paper of 12th Five Year Plan and our own calculation indicates that we will have CAD of 2.5% of GDP.”

At present, there is no problem in financing CAD of 2.5%, he said, adding, “So long we continue to maintain a healthy growth rate and so long as fiscal deficit continue to remain at reasonable control, there should be no problem in attracting capital flow.”

But, he said, capital flows by very nature are very volatile. It is influenced by both domestic and international factors. It is also affected by push factor and as well pull factor. So, therefore, we need to moderate our dependence on the financing of CAD through capital flows.

On the borrowings, he said, “I think the effort of the government will be to retain the fiscal deficit at the budgeted level and I do not expect the borrowing programme of the government of India as of now to exceed what was originally estimated.”

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