India needs to attract more foreign capital and deepen the corporate bond market to support its growth ambitions and strengthen its position as an important financial centre, Alok Tiwari, joint secretary, Department of Economic Affairs (DEA), said on Wednesday.
“Foreign capital has to be welcomed. Foreign capital has to be attracted,” Tiwari said while speaking at the FICCI Capital Markets Conference.
“There are some concerns. Foreign capital has not been very forthcoming of late. Though the cycle appears to have turned in July,” he said, adding that the government was working on this concern.
He said there was broad consensus among the government, regulators and market participants on the need to attract overseas capital, adding that efforts in this direction were a ‘work in progress’.
On foreign investment, he said the government was also working to streamline the statutory architecture. “The Foreign Exchange Management (FEM) and related rules are being recast and are currently open for public consultation by the Reserve Bank of India. The aim is to make the framework more principle-based, easier to follow and easier to navigate,” he said.
Tiwari also flagged the need to improve the depth and liquidity of India’s corporate bond market. While the debt market has expanded, the secondary corporate bond market does not have the level of depth, liquidity and participation that it should, he said. Developing the corporate bond market remains a priority, he noted.
He said a Securities and Exchange Board of India (Sebi) committee had been set up to develop a framework for market-making in corporate bonds. The committee has invited suggestions and work is under way to develop a framework aimed at improving secondary-market depth and liquidity.
Tiwari said India’s capital markets had undergone a structural transformation, driven by rising investor participation, greater regulatory sophistication and modernisation of the legal framework. The debt market had also expanded, he said.