FSDC decides to boost corporate bond market for infrastructure funds

The Financial Stability and Development Council (FSDC) has decided to take steps to make corporate bond market more vibrant, enabling the industry to raise debt funds for infrastructure investments.

Reviewing the action taken on the decisions taken in the first two meetings of the sub-committee of FSDC, the council, at its meeting chaired by finance minister Pranab Mukherjee, also underscored the need to immediately establish the Infrastructure Debt Funds to enable private sector raise half of the trillion-dollar outlay envisaged in the 12th Five Year Plan.

The meeting also discussed the state of the economy and its short-term prospects and challenges, sovereign credit rating of India and monitoring of financial stability.

There was general consensus that while inflation may not be conducive to short-term economic growth, India's medium to long-term economic growth prospects remain bright.

The council noted that investment as a percentage of GDP was encouraging and that it should help growth prospects of the nation. Provisional figures of tax collections for the first quarter of current fiscal are encouraging and they give reason for optimism on growth and meeting the fiscal targets, the council said.

On the issue of sovereign credit rating, the meeting decided that it would be necessary for the government to strengthen its interaction with the rating agencies. The council noted the recent structure that has been put in place in the ministry of finance for the exchange of information with the credit rating agencies. For better interaction with the agencies, it was decided to further broad-base the process and present India's case for higher rating by studying the methodologies adopted by the rating agencies.

With regard to the issue on monitoring financial stability, it was decided that the regulators would share their assessments in the sub-committee of the FSDC and with the secretariat of FSDC and discuss the same in the council. This process will be an input in their reports on assessment of financial stability, it said.

The third meeting of the FSDC, held on Wednesday, was attended by RBI governor D Subbarao, finance secretary R S Gujral, department of economic affairs secretary R Gopalan, chief economic advisor to the finance ministry Kaushik Basu, SEBI chairman U K Sinha, IRDA chairman J Hari Narayan, chairman of the Pension Fund Regulatory and Development Authority Yogesh Agarwal, additional secretary to the department of economic affairs Bimal Julka and joint secretary to the department of economic affairs Thomas Mathew.