FSDC for urgent steps to set up infra debt funds

The Financial Stability and Development Council (FSDC), headed by Finance Minister Pranab Mukherjee, on Wednesday decided to initiate steps for a more vibrant corporate bond market to enable industry to raise debt funds for infrastructure.

At its meeting to review the state of the economy and take stock of the situation a day after the Reserve Bank of India (RBI) hiked its key policy rates by a hefty 50 basis points, the FSDC also underscored the need to immediately set up the infrastructure debt funds which would help the private sector in raising half of the $1-trillion outlay envisaged for development of the country's infrastructure during the XII Plan.

“It was decided to take steps to make the corporate bond market more vibrant... the need is to immediately establish the Infrastructure Debt Fund with a view to enabling the private sector raise half of the trillion-dollar outlay envisaged in the XII Plan,” a Finance Ministry statement said.

The meeting of the FSDC — a high-level body set up last year to strengthen and institutionalise the mechanism for maintaining financial stability, financial sector development and inter-regulatory co-ordination — was attended by RBI Governor D. Subbarao and chiefs of the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority (IRDA) and the Pension Fund Regulatory and Development Authority (PFRDA) along with all top officials of the Finance Ministry, including Chief Economic Advisor Kaushik Basu. In the Council's discussions on the macro-economic scenario, the general consensus was that while inflation might not be conducive to short-term economic growth, the country's medium-to-long term growth prospects remained bright. “In the short-term, it is necessary to tackle inflation,” it said in justification of the RBI rate hike while noting that investment as a percentage of GDP (gross domestic product) was encouraging and this should help growth prospects of the nation.

On the issue of the country's sovereign credit rating, it was felt that it would be necessary for the government to strengthen its interaction with rating agencies. For better interaction with these agencies, it was decided to further broadbase the process and present India's case for higher rating by studying the methodologies adopted by them.

Steps will be initiated to make the bond market more vibrant

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