Fiscal deficit affecting corporate debt market: PM

Undeveloped corporate debt market is a weakness in India's financial system and high fiscal deficit is further complicating the problem, Prime Minister Manmohan Singh said Friday.

"A weakness in our financial system relates to the market for corporate debt. While the market for government debt is very large, the market for corporate debt has yet to develop as it should. It is not large enough and not liquid enough," the prime minister said.

He said fiscal deficit must be brought down, as it was a pre-condition to make corporate debt market vibrant.

"To some extent, the reduction in the fiscal deficit is a pre-condition for this development since sovereign debt often crowds out private debt," he said.

While addressing the silver jubilee celebration of the Securities and Exchange Board of India (SEBI), the prime minister said his government has been taking measures to curb fiscal deficit and develop the corporate debt market.

"Efforts are being made to reduce the fiscal deficit, and as we succeed we can expect the corporate debt markets to expand," he said.

The government targets to bring down fiscal deficit to 4.8 percent of the country's gross domestic product (GDP) in the current financial year as compared to 5.2 percent recorded in the previous year.