Finance Minister P Chidambaram said that the government was trying to remove the vast disparities in tax structures implemented in several states, which was hindering development of a seamless corporate bonds market acro implemented in several statesss the country.
“At a meeting with state ministers, I have made a proposal for removal of disparities in tax structures pertaining to corporate debt market. The issue is under active consideration of several states,” said Chidambaram, while inaugurating the first electronic corporate bond market in the country by ICAP India.
But the minister parried media queries relating to spiraling inflation and its impact on the economic growth. Inflation rose to 6.68 per cent for the week ended March 15, 2008.
Stating that a developed corporate debt market was imminent at a time when infrastructure sector was planning to invest over $500 billion (over Rs 2,000 crore) over the next four years, the minister said the Securities and Exchange Board of India (Sebi) was finalising the draft guidelines.
On allowing foreign investors into corporate bond market, Chidambaram, while referring to the US sub-prime crisis, said, “We are moving ahead on this issue with great caution. You are innovators of instruments, and I am a regulator. I have to keep ahead of you by one step.”
The minister, however, said that the pool of investors, which is confined to institutional investors now, would be enlarged as part of expanding the market, based on the RH Patil committee recommendations. About 8,000 corporate bonds are being traded in the country, though the secondary market trading in them does not exceed 4 per cent of the GDP per annum.
“Though the bonds market existing for decades there is no single benchmark for the market due to voice based trading. With electronic trading coming into being it may not be too long before we can go to order matching system which will enable such benchmarks,” said Manish Sabharwal, vice-chairman of ICAP India Private Ltd.
Sebi has granted approvals for four proposals to set up such platforms for providing trading and reporting facilities to their clients as part of increasing the market depth and breadth.